Bridge of Europe and Nepal

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Early History

Neolithic tools found in the Kathmandu Valley indicate that people have been living there for at least 9,000 years. It appears that people who were probably of Kirat ethnicity lived in Nepal more than 2,500 years ago. The Kiratis are a tribe of jungle and mountain people who migrated from various parts of Central Asia, China and the Himalayas. Nepal's very first recorded, though still legendary, history began with the Kiratis, who may have arrived from the west to the Kathmandu valley. Little is known about them, other than their deftness as sheep farmers and great fondness for carrying long knives. Their first king was Elam; also known as Yalambar, who is referenced in the epic Mahabharata. The last king of the Kirat dynasty was Gasti, a weak ruler, who is said to have been overthrown by the Somavanshi ruler Nimisha. This ended the powerful Kirata dynasty that had lasted for about 1225 years. After their defeat, the Kiratas moved to the Eastern hills of Nepal and settled down, divided into small principalities. Their settlements were divided into three regions, i.e. 'Wallokirat' that lay to the East of the Kathmandu Valley, 'Majkirat' or Central Kirat region and 'Pallokirat' that lay to the far East of the Kathmandu valley. Around 1000 BC, small kingdoms and confederations of clans arose in the region. From one of these, the Shakya confederation, arose a prince named Siddharta Gautama (563-483 BC), who later renounced his royalty to lead an ascetic life and came to be known as the Buddha ("the enlightened one"). The 7th Kirati king, Jitedasti, was on the throne in the Nepal valley at the time. By 250 BC, the region came under the influence of the Mauryan Empire of northern India, and later became a vassal state under the Gupta Empire in the fourth century AD. In the 5th century, rulers called the Licchavis governed the majority of its area. There is a good and quite detailed description of the kingdom of Nepal in the account of the renowned Chinese Buddhist pilgrim monk Xuanzang, dating from c. 645 AD. The Licchavi dynasty went into decline in the late 8th century and was followed by a Newari era, from 879, although the extent of their control over the entire country is uncertain. By the late 11th century, southern Nepal came under the influence of the Chalukaya Empire of southern India. Under the Chalukayas, Nepal's religious establishment changed as the kings patronised Hinduism instead of the prevailing Buddhism.  

• Middle Ages

  By the early 12th century, leaders were emerging whose names ended with the Sanskrit suffix malla ("wrestler"). Initially their reign was marked by upheaval, but the kings consolidated their power and ruled over the next 200 years; by the late 14th century, much of the country began to come under a unified rule. Early Malla rule started with Ari Malla in the 12th century. Over the next two centuries his kingdom expanded widely, into the Terai and western Tibet, before disintegrating into small principalities, which later became known as the Baise (i.e. the 22 principalities), along with the emergence of the Chaubisi (i.e. 24 principalities). The history of these principalities is recorded in some stone and copper plate inscriptions of western Nepal that largely remain unedited. Jayasthiti Malla, with whom commences the later Malla dynasty of the Kathmandu Valley, began to reign at the end of the 14th century. Though his rule was rather short, his place among the rulers in the Valley is eminent for the various social and economic reforms such as the Sanskritisation of the Valley people, new methods of land measurement and allocation etc. Yaksha Malla, the grandson of Jayasthiti Malla, ruled the Kathmandu Valley until almost the end of the 15th century. After his demise, the Valley was divided into three independent Valley kingdoms: Kathmandu, Bhaktapur and Patan in about 1482. This division led the Malla rulers into internecine clashes and wars for territorial and commercial gains. Mutually debilitating wars gradually weakened them, that facilitated conquest of the Kathmandu Valley by King Prithvi Narayan Shah of Gorkha. The last Malla rulers were Jaya Prakasha Malla, Teja Narasingha Malla and Ranjit Malla of Kathmandu, Patan and Bhaktapur respectively.
 

• Shah Dynasty 

After decades of rivalry between the medieval kingdoms, modern Nepal was created in the latter half of the 18th century, when Prithvi Narayan Shah, the ruler of the small principality of Gorkha, formed a unified country from a number of independent hill states. Prithvi Narayan Shah dedicated himself at an early age to the conquest of the Kathmandu Valley and the creation of a single state, which he achieved in 1768. Prithvi Narayan Shah (c. 1769-1775), was the 9th generation descendant of Dravya Shah (1559-1570), the founder of the ruling house of Gorkha. Prithvi Narayan Shah succeeded his father King Nara Bhupal Shah to the throne of Gorkha in 1743 AD. King Prithvi Narayan Shah was quite aware of the political situation of the Valley kingdoms as well as of the Barsi and Chaubisi principalities. He foresaw the need for unifying the small principalities as an urgent condition for survival in the future and set him self to the task accordingly.

His assessment of the situation among the hill principalities was correct, and the principalities were subjugated fairly easily. King Prithvi Narayan Shah's victory march began with the conquest of Nuwakot, which lies between Kathmandu and Gorkha, in 1744. After NuwakotValleyÕs communications with the outside world were thus cut off. The occupation of the Kuti Pass in about 1756 stopped the Valley's trade with Tibet. Finally, King Prithvi Narayan Shah entered the Valley. After the victory of Kirtipur. King Jaya Prakash Malla of Kathmandu sought help from the British and so the East India Company sent a contingent of soldiers under Captain Kinloch in 1767. The British force was defeated at Sindhuli by King Prithvi Narayan Shah's army. This defeat of the British completely shattered the hopes of King Jaya Prakash Malla. The capture of Kathmandu (25 September 1768) was dramatic. As the people of Kathmandu were celebrating the festival of Indrajatra, Prithvi Narayan Shah and his men marched into the city. A throne was put on the palace courtyard for the king of Kathmandu. Prithvi Narayan Shah sat on the throne and was hailed by the people as the king of Kathmandu. Jaya Prakash Malla managed to escape with his life and took asylum in Patan. When Patan was captured a few weeks later, both Jaya Prakash Malla and the king of Patan, Tej Narsingh Mallal took refuge in Bhaktapur, which was also captured after some time.

Thus the Kathmandu Valley was conquered by King Prithvi Narayan Shah and Kathmandu became the capital of the modern Nepal by 1769. King Prithvi Narayan Shah was successful in bringing together diverse religio-ethnic groups under one national. He was a true nationalist in his outlook and was in favour of adopting a closed-door policy with regard to the British. Not only his social and economic views guided the country's socio-economic course for a long time, his use of the imagery, 'a yam between two boulders' in Nepal's geopolitical context, formed the principal guideline of the country's foreign policy for future centuries. The Nepalese had differences of opinion with the East India Company regarding the ownership of the land strip of the western Terai, particularly Butwal and Seoraj. The outcome of the conflict was a war with the British. The British launched their attack on the Nepali forces at Nalapani, the western most point of Nepal's frontier at the close of 1814. Though the Nepalese were able to inflict heavy losses to the British army on various fronts, the larger army and the superior weapons of the British proved too strong. The Nepali army evacuated the areas west of the Mahakali river and ultimately the treaty of Sugauli was signed with the British in 1816. Among other things, this treaty took away a large chunk of the Terai from Nepal and the rivers Mahakali and Mechi were fixed as the country's western and eastern boundaries. At this time, King Girvana Yuddha Biktram Shah was on the throne of Nepal, and the power of state was in the hands of Prime Minister Bhimsen Thapa who wielded enormous power during the rule of King Girvana Yuddha Bikram Shah and his son King Rajendra Bikram Shah.  

• Rana Rule

  Factionalism inside the royal family had led to a period of instability. In 1846 a plot was discovered revealing that the reigning queen had planned to overthrow Jung Bahadur Rana, a fast-rising military leader. This led to the Kot Massacre; armed clashes between military personnel and administrators loyal to the queen led to the execution of several hundred princes and chieftains around the country. Jung Bahadur Rana emerged victorious and founded the Rana lineage. The king was made a titular figure, and the post of prime minister was made powerful and hereditary. The Ranas were staunchly pro-British and assisted them during the Indian Sepoy Rebellion in 1857 (and later in both World Wars). Some parts of the Terai Region were given back to Nepal by the British as a friendly gesture, because of her military help to sustain British control in India during the Sepoy Rebellion. In 1923, the United Kingdom and Nepal formally signed an agreement of friendship, in which Nepal's independence was recognised by the UK. Slavery was abolished in Nepal in 1924. Nevertheless debt bondage even involving debtors' children has been a persistent social problem in the Terai. In the late 1940s, newly emerging pro-democracy movements and political parties in Nepal were critical of the Rana autocracy. Meanwhile, with the assertion of Chinese control in Tibet in the 1950s, India sought to counterbalance the perceived military threat from its northern neighbour by taking pre-emptive steps to assert more influence in Nepal. India sponsored both King Tribhuvan (ruled 1911-55) as Nepal's new ruler in 1951 and a new government, mostly comprising the Nepali Congress Party, thus terminating Rana hegemony in the kingdom. After years of power wrangling between the king and the government, King Mahendra (ruled 1955-72) scrapped the democratic experiment in 1959, and a "partyless" panchayat system was made to govern Nepal until 1989, when the "Jan Andolan" (People's Movement) forced King Birendra (ruled 1972-2001) to accept constitutional reforms and to establish a multi-party parliament that took seat in May 1991. In 1991-92, Bhutan expelled roughly 100,000 ethnic Nepalis, most of whom have been living in seven refugee camps in eastern Nepal ever since. In 1996, the Communist Party of Nepal (Maoist) started a bid to replace the royal parliamentary system with a people's socialist republic by violent means. This led to the long Nepal Civil War and more than 12,000 deaths. 

• 21st Century 

On 1 June 2001, there was a massacre in the royal palace. King Birendra, Queen Aiswarya, Crown Prince Dipendra and seven other members of the royal family were killed. Dipendra was accused of patricide and of committing suicide thereafter. This outburst was alleged to have been Dipendra's response to his parents' refusal to accept his choice of wife. Nevertheless there are speculation and doubts among Nepalese citizens about who was responsible. Following the carnage, Birendra's brother Gyanendra inherited the throne. On 1 February 2005, Gyanendra dismissed the entire government and assumed full executive powers to quash the violent Maoist movement, but this initiative was unsuccessful because a stalemate had developed where the Maoists were firmly entrenched in large expanses of countryside yet could not dislodge the military from numerous towns and the largest cities. In September 2005, the Maoists declared a three-month unilateral ceasefire to negotiate. In response to the 2006 democracy movement King Gyanendra agreed to relinquish sovereign power to the people. On 24 April 2006 the dissolved House of Representatives was reinstated.

• Present situation

 
Using its newly acquired sovereign authority, on 18 May 2006 the House of Representatives unanimously voted to curtail the power of the king and declared Nepal a secular state, ending its time-honoured official status as a Hindu Kingdom. On 28 December 2007, a bill was passed in parliament to amend Article 159 of the constitution – replacing "Provisions regarding the King" by "Provisions of the Head of the State" – declaring Nepal a federal republic, and thereby abolishing the monarchy. The bill came into force on 28 May 2008, as the constituent assembly overwhelmingly voted to abolish royal rule. The Communist Party of Nepal (Maoist) won the largest number of seats in the Constituent Assembly election held on 10 April 2008, and formed a coalition government which included most of the parties in the CA. Although acts of violence occurred during the pre-electoral period, election observers noted that the elections themselves were markedly peaceful and "well-carried out". The newly elected Assembly met in Kathmandu on 28 May 2008, and, after a polling of 564 constituent Assembly members, 560 voted to form a new government, with the monarchist Rastriya Prajatantra Party, which had four members in the assembly, registering a dissenting note. At that point, it was declared that Nepal had become a secular and inclusive democratic republic, with the government announcing a three-day public holiday from 28 to 30 May. The King was thereafter given 15 days to vacate the Narayanhiti Royal Palace, to re-open it as a public museum. Nonetheless, political tensions and consequent power-sharing battles have continued in Nepal. In May 2009, the Maoist-led government was toppled and another coalition government with all major political parties barring the Maoists was formed. Madhav Kumar Nepal of the Communist Party of Nepal (Unified Marxist-Leninist) was made the Prime Minister of the coalition government.

Rulling more than one year, this coalition gouverment fell down becasue of the Moiest and Congress party's interest to be on the power. At the same time, the president of his own party played a role quiet different in order to establish himself on the power. After several months of gouvernment vacant, constinutional assembly elected Mr. Jhalanath Khanal, the president of Nepal Communist Party (Unified Marxist-Leninist) with the coalition of Moist and some parities of Terai region ( Jana adhikarbadi forum).

Even today, Nepal is on the process of writing of the constitution of Nepal. However, Three years period had passed without completing 5O% of the misunderstanding between parties. Two years was previewed while constitutional assembly had set up the fixed period and  one year was prolonged. Again, its period has prolonged by three months by the common 7 points understanding between political parties of the Constitutional Assembly, mainly three key parties -Nepali Congress, CPUML and Maoist.
                                                                                   - Ram Hari KHAKUREL

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Buddhism has significant number of its residents in Nepal. Approximate 26% of the population practises Buddhism, specially Tibetan form of Buddhism. Nepal can be said to be the meeting point of Indian and Tibetan streams of Buddhism. This is not surprising for Nepal is in close proximity to Tibet. Fine Buddhist art has also hugely developed in Nepal. Ethnic groups residing in Central Nepal are mostly the followers of Buddhism. Buddhism in Nepal has also been influenced by Hinduism, another dominant religion in Nepal.

History of Nepal Buddhism
Siddhartha Gautama, who founded Buddhism, was himself born in an ancient kingdom of Nepal. The country's closeness with India ensured that it became a treasury of Buddhist Sanskrit literature. Emperor Ashoka of India had established a pillar in Lumbini, the birthplace of Lord Buddha. Gradually, Buddhism became a dominant religion in sparsely populated northern areas of the country.

Buddhist Pilgrimage Sites in Nepal
Nepal hosts several Buddhist pilgrimage sites which are highly revered by the Buddhists. Ancient stupas of Swayambhunath and Bodhnath are considered most sacred among Nepali pilgrimage sites.

Kapilavastu
Kapilvastu, a historic town, is closely associated with Buddha's life. It is located about 250 km from Kathmandu and 25 km from Lumbini. It was here where Siddhartha Gautama, who later became Lord Buddha, was born in the sixth century B.C. Lord Buddha lived in Kapilvastu to the age of 29. Today the town is visited for religious, cultural and archaeological importance

Lumbini
Divine feelings like spirituality and holiness occupy one's heart when one is in Lumbini. Included among the world heritage sites, Lumbini has rich natural backdrop and impressive architectural beauty. The city, located in South-Western Terai of Nepal, is one of the most important Buddhist pilgrimages.

Svayambhunath
Swayambhunath, located west of Kathmandu is a pilgrimage held in high esteem Swambhunath can be literally translated as 'self-existent Buddha'. The grand stupa tells how Buddhism spread its influence in Nepal. The Stupa tells all about history and origin of Buddhism in Nepal.

Bouddhanath
Tibetan culture can be experienced in Bodhnath Stupa, located in Kathmandu valley. After the 1959 Chinese invasion, thousands of Tibetans arrived in Bouddhanath. Henceforth, the temple developed as one of the most important centers of Tibetan Buddhism. This largest stupa in Nepal was erected sometime in the 14th century after the Mughal invasion.

Branches of Buddhism
Buddhism in Nepal comprises Theravada, Mahayana and Vajrayana streams. The Tibetan Mahayana tradition has most of its adherents in northern Nepal, with approximately 3000 monasteries. Newar Vajrayana Buddhism is a popular religious system in the Kathmandu Valley with number of rituals.Some Nepalese have also turned to Theravada practice based on the Pali canon.

Buddhist Practices
Prostrating pilgrims, the spinning of prayer wheels, collective chants and burning lamps are some popular Buddhist practices often seen by tourists. Buddhists believe that if a slip of paper bearing a mantra is kept inside the wheels, the prayers reach gods when the wheel is spun. Several Buddhists are seen performing these practices in Buddhist religious sites all around the country.

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Very openly speaking, on one side you have people associated with Rosenstein-Rodan who argues that a successful development/industrialization strategy needs to “attack on all fronts”, that is aim for increasing in productivity and investment in all sectors of the economy at once. On the other there is Hirschman who argues that it is better to focus on a few key industries. These will create demand for inputs (backward linkages) and serve as inputs to other industries themselves (forward …

linkages) and will spur development economy wide. However, we have to look the situation of the particular country before choosing the development strategies so that the optimal level of economic growth can be achieved.
Much of the discussion in national economics is concerned with growth and the growth of a particular nation will be determined through the adopted policies and strategies of development by that particular country. As we all know that the strategies of development are of two types – Balanced and Unbalanced. So, let’s discuss separately about both strategies.
Balanced Growth Strategy:
Balanced growth strategy is the investment policy on which the investment should be made simultaneously in all the sectors of economics. According to P. A. Samuelson “Balanced growth implies growth in every kind of capital stock”. According to Benjamin Higgins “A wave of capital investment in number of industries is called balanced growth”. Similarly, according to UNO “Balanced growth refers to full employment, a high level of investment, overall growth in productive capacity equilibrium”. Thus, the balanced growth productivity is dynamic and elastic. Its secret is proper balance between different sectors like agriculture and industry; human capital and material output; domestic trade and foreign trade; demand and supply factors etc. As advocated by Ragnar, Nurkse, Arthur Lewis, A. Young, T. Sitovsky and Rosenstein-Rodan, the doctrine of balancd growth requires; balance in supply, balance in demand and sectoral balance on agricultural, economy, industry, transportation etc.
This theory sees the main obstacles to development in the narrow market and, thus, in the limited market opportunities. Under these circumstances, only a bundle of complementary investments realized at the same time has the chance of creating mutual demand. The theory refers to Say’s theorem and requests investments in such sectors which have a high relation between supply, purchasing power, and demand as in consumer goods industry, food production, etc.
The real bottleneck in breaking the narrow market is seen here in the shortage of capital, and, therefore, all potential sources have to be mobilized. If capital is available, investments will be made. However, in order to ensure the balanced growth, there is a need for investment planning by the governments.
Development is seen here as expansion of market and an increase of production including agriculture. The possibility of structural hindrances is not included in the line of thinking, as are market dependencies. The emphasis is on capital investment, not on the ways and means of achieving capital formation. It is assumed that, in a traditional society, there is ability and willingness for rational investment decisions along the requirements of the theory. As this will most likely be limited to small sectors of the society, it is not unlikely that this approach will lead to super-imposing a modern sector on the traditional economy, i.e., to economic dualism. As Prof. Nurske pointed out, balanced growth strategy talks about that more or less synchronized application of capital to a wide range of different industries.
Unbalanced Growth Strategy:
Hirschman, Singer, Fleming, Burger, Paul Streeten etc., have recommended the strategy of unbalanced growth as an alternative to the balanced growth. It is opposite of the doctrine of balanced growth on which the investment should be made in selected sectors rather than simultaneously in all sectors of the economy. The unbalanced growth theory emphasizes on few selected sectors’ or industries’ investment for the rapid development so that the acquiring economies from one sector can be utilized for the development of other sector and eventually the economy gradually moves a head from the path of unbalanced growth to that of balanced growth. The unbalanced growth strategy talks about the allotment of resources rationally in leading sectors.
Contrary to the theory of balanced growth, in Hirschman’s opinion, the real bottleneck is not the shortage of capital, but lack of entrepreneurial abilities. Potential entrepreneurs are hindered in their decision-making by institutional factors: either group considerations play a -great role and hinder the potential entrepreneur, or entrepreneurs aim at personal gains at the cost of others and are thus equally detrimental to development. In view of the lack of entrepreneurial abilities there is a need for a mechanism of incentive and pressure which will automatically result in the required decisions. According to Hirschman, not a balanced growth should be aimed at, but rather existing imbalances— whose symptoms are profit and losses—must be maintained. Investments should not be spread evenly but concentrated in such projects in which they cause additional investments because of their backward and forward linkages without being too demanding on entrepreneurial abilities. Manufacturing industries and import substitutions are relevant examples.
Suitability of strategies for developing countries like Nepal
After looking into both strategies, the unbalanced growth strategy is better for developing countries like Nepal. The prioritized and sectoral investment should be made first rather the overburden investment in all sectors. Development is a gradual process. If one country gets succeed in one sector then only it becomes capable enough to invest in other sectors and consequently the investment can be done one by one in all sectors in the long run.
Further, the developing countries’ main lacking is that they do not have sufficient capital to invest in all sectors at once. They are not capable of developing different sectors simultaneously due to shortage of resources and many factors. Therefore, investment should be made in leading sector of the economy deliberately. Besides, in developing countries, poverty is rampant and to cope with many problems, the countries have to rely on foreign aid. Under these circumstances, how can the developing countries like Nepal can assume to invest their tiny capital (mainly borrowed from foreign countries) in all sectors for the economic growth? So, balanced growth strategy’s investment in all sectors simultaneously is beyond the capabilities of developing countries like Nepal. Besides, the balanced growth strategy talks a lot about balanced regional development, division of labor, possibilities of innovative and researches, creation of social capital, wide extent of market, better use of resources, less dependence on foreigners and stability of prices but these things are only possible when the country is developed and there is no dearth of capital investment in all sectors. So, only a zero-aid-need and developed country can apply the principle of balanced growth strategy.
As suggested by Hirschman, unbalanced growth strategy is directed towards the skill formation opportunity via the investment in SOC and DPA sectors of UDCs. So the strategy is most appropriate for the developing country like Nepal. Besides, the strategy is practical in real sense as it talks primarily about the leading sectors investment and its motive is intended towards the development phenomena of UDCs. Furthermore, the unbalanced growth strategy is levelheaded towards developing countries’ developments rather creating overstrain tension of all sectors’ simultaneous investments. Because, it is based on the ground reality of UDCs on which the better utilization of available resources and advantages of specialization in the concept of competitive cost trend mechanism is possible. In nutshell, for each sector’s prosperous and competitive growth, unbalanced growth strategy of development is necessary for developing countries like Nepal. However, it is strictly connected with the particular empirical circumstances of the countries.

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After the establishment of the diplomatic relations between Nepal and the European Union in 1973, the Union has extended invaluable cooperation to the socio-economic development efforts of Nepal. EEC joined the Nepal Aid Group in 1982 so as to coordinate its position with other donor countries. Besides economic assistance, the European Union has also taken keen interest in the problems of Bhutanese refugees in Nepal. The Commission of the European Communities established the EC Consultant Office in Nepal in May 1992 with a view to expanding bilateral contacts.

Nepal established residential Embassy in Brussels and appointed Mr Durgesh Man Singh as the first Royal Nepalese Ambassador to EEC in 1992. Mrs. Francine Henrich was appointed EEC?s first Ambassador to Nepal in November 1991 with residence in New Delhi.

An Agreement concerning establishment of EC delegation in Nepal was signed on 13th of March 2002 in Kathmandu. With the signing of the agreement, a full-fledged EC delegation office has been established in Kathmandu.

Nepal?EU Economic Cooperation
Since the inception of EU assistance to Nepal, the Commission for the European Communities has provided a grant assistance of about 48 million ecu to Nepal representing an average of 3.2 million ecu per year. The large portion of the EU assistance has been channelled to rural development projects.

The first annual meeting between Nepal and EC was held in Kathmandu from 17 to 19 February 1992. Similarly, the second meeting was also held in Kathmandu from 4 to 5 November 1993. In this meeting both sides reviewed the ongoing projects/programs and also discussed the future areas of cooperation.

Nepal-EC annual talks have been replaced by a Joint Commission following the entry into force of the Co-operation Agreement. The Joint Commission is a mechanism that meets every two years and reviews the ongoing projects, discusses pipeline projects and new projects to be implemented with EU assistance. A Cooperation Agreement with EC was signed in Brussels on November 20, 1995. The agreement covers the areas like: trade and commercial cooperation, economic cooperation, development cooperation, joint investment, energy, science and technology, agriculture, environment, and human resource development.

The First Session of the Nepal-EC Joint Commission was held in Nepal from November 20 to 21, 1996. The meeting identified a number of priority areas for Nepal-EC cooperation. The Second Session of the Nepal-EC Joint Commission was held in Brussels from October 7 to 8, 1999. The Nepalese delegation was led by Special Secretary Mr. Narayan S. Thapa and the EC delegation was led by Mr. Emiliano Fossati, Director for Asia (Except Japan and Korea). The Joint Commission decided on the course of development cooperation between Nepal and EC until 2001. At this meeting, the importance of human rights was noted by both sides as an essential element upon which the EC-Nepal Co-operation was built.

An Agreement between the European Community and the Kingdom of Nepal on Trade in Textile products was signed on December 10, 2003. Likewise, Nepal and EC have singed a Framework Agreement for exporting sugar to EC under the EBA (Everything but Arms) initiative.

The Third Session of the Nepal-EC Joint Commission was held in Kathmandu on 19 March 2002.

The EU has committed more than Euro 130 million in development assistance to Nepal since 1977 (from 1991 to 1997 commitments amounted to Euro 90 million). Focal areas include irrigation and rural development, as well as programmes in animal health, watershed management, reproductive health, primary education and institution building.

The Fourth Session of Nepal-EC Joint Commission was held in Brussels on September 21, 2004. The Joint Commission discussed about the Bhutanese refugee problem, and also discussed about a wide spectrum of Nepal-EC cooperation and reviewed existing bilateral cooperation including areas of development partnership between Nepal and the European Union. The Joint Commission stressed the need to enhance human rights protection and promotion to support capacity building measures. Before the Session, meetings of the two working groups namely the Working Group on Economic and Trade Cooperation and Sub-commission on Development Cooperation were held in Kathmandu on May 2004.

On December 20, 2004, the European Commission adopted the regulation prolonging Nepal's derogation from GSP rules of origin for certain textile products for the period of two years until 31/12/2006.

A Memorandum of Understanding (MOU) on National Indicative Programme (NIP) for Nepal (2002-2006) was signed between Nepal and the European Commission on October 20, 2004 in Brussels. The National Indicative Programme (NIP) 2002-2006 for Nepal takes forward the main goals as laid out in the EC-Nepal Country Strategy Paper, 2002-2006.

The EC's assistance will be concentrated on the overarching objective of poverty reduction. Other areas of cooperation include development of rural infrastructures, renewable energy, community development, consolidation of democracy addressing some of the root causes of the conflict, such as socio-economic inequalities, promotion of human rights and the rule of law and trade development. The EC development assistance for the period 2002-2006 is Euro 70 million.

The European Union's Position on Maoist Insurgency in Nepal
The EU feels that the root cause of the Nepal conflict is a complex web of interacting factors including uneven development within the country.

However, the European Union upheld the government of Nepal's right to defend the country's newly established democracy in countering this terrorist insurgency. The European Union noted that the democratic State has the sole right to use legitimate force to preserve the rights and security of its citizens.

The EU urges Government of Nepal and the Maoists to seek a peaceful resolution of the conflict.

The EU strongly condemns systematic and continued human rights violations by the Maoists such as abduction of schools children and young and their indoctrination into their militia, extortion, killing of innocent civilian, destroying infrastructures, etc.

Visit of EU Troika delegation to Nepal
A first European Union (EU) Troika delegation visited Nepal from 13 to 15 December 2004. The delegation was headed by Mr. Robert Milders, Director for Asia and Oceania Department, Ministry of Foreign Affairs of the Netherlands. The EU Troika is made up of representatives from the current EU presidency, next EU presidency and representatives of European Commission and Council Secretariat.

The aim of the Troika was to offer EU support to all efforts aimed at promoting multi-party democracy - within the framework of a constitutional monarchy - and human rights as well as curtailing violence and renewing dialogue between Government of Nepal and the Maoists.

The second Troika delegation visited Nepal from 4 to 6 October 2005. The objective of the Troika visit was to assess the political situation of Nepal since the last visit, to take stock of the cease-fire announced by the Maoists, Government of Nepal's response to the unilateral cease-fire, revival of the peace process, etc.

Nepal-EU Trade
The EU is one of the principal trading partners of Nepal. The EU imports mainly handmade carpets, textile, gems and jewellery, wood and paper products, leather products, etc. from Nepal. Nepal imports engineering goods, telecommunication equipments, chemical and minerals, metals and steels, agricultural products, etc. from the EU countries. The EU has provided duty-free and quota-free facilities to the Nepalese export under its Everything But Arms (EAB) policy for the LDC's.

The EC agreed to prolong Nepal's derogation from GSP rules of origin for certain textile products for the period of two years (until 31/12/2006). Under the EU Everything But Arms (EBA) Scheme for LDCs, Nepal has been exporting sugar duty-free to EU countries since 2003. Annual sugar export from Nepal is approximately 9000 metric tonnes.

The EC will be introducing the new Generalised System of Preferences (GSP) in 2006 and will remain valid till 2015. For nearly 2100 products out of 11,000 except arms and ammunitions, duty rate will be zero. As the provisions of EBA Scheme for LDCs are incorporated into the new GSP, Nepal can greatly benefit from it.

EU Assistance to Bhutanese Refugees
The European Union is one of the major sponsors of the United Nations High Commissioner for Refugees' programme in the camps. The EU welcomed the prospect of a speedy verification process leading to the repatriation of refugees and the ultimate closing of the camps.

The EU has been helping Nepal in providing food aid to the Bhutanese Refugees and other assistance for their early repatriation. The EU has stated that it would continue to support refugees from Bhutan. Till now the EC has been among major donors to support the refugee camps via NGO?s and the UNHCR.

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Bilateral Relations: Belgium and Nepal

Political Cooperatioin

Nepal and Belgium established diplomatic relations on 19 August 1963. Nepal has opened her residential embassy in Brussels in 1992. The Embassy of Belgium in New Delhi is concurrently accredited to Nepal. The relations between the two countries have always been marked by goodwill, trust and mutual respect. The year 2003 marked the 40th anniversary of the establishment of diplomatic relations between the two kingdoms.

Contacts at various levels, especially at high level, have contributed to strengthen bilateral ties. His Late Royal Highness Crown Prince Dipendra paid a private visit to the Kingdom of Belgium from 8 to 11 June 1997. The then Prime Minister Sher Bahadur Deuba visited Belgium from 25-28 August 2002 during which he met with the Prime Minister of Belgium and various other dignitaries. During the meeting, discussions were held on the political situations of Nepal and other bilateral and international matters of mutual interests.

Bilateral Cooperation
The Belgian government provides official development assistance to those countries that are included in the priority list. As Nepal is not in the list, Nepal has requested the Belgian government for its inclusion in the list. According to the Belgian authorities, dropping from the list of a country and inclusion in it of a new one does not occur frequently. However, they take note of Nepal's development needs and maintain the view that assistance could be channelled through multilateral and non-governmental organizations.

At present, Belgian Red Cross is involved in Nepal with some grassroots projects in Dhading and Gorkha districts. The Belgian government accepts proposals only from those NGOs which have been registered with it and can provide up to 100% grant assistance in select fields, 85% for larger NGOs and in normal cases 75% of the NGO budget. In addition, there are local NGOs, mainly formed by those Belgians who have visited Nepal. These NGOs regularly organize fund-raising programmes to support their small and medium scale activities in Nepal. These include Bikas Nepal Foundation, Belgium-Nepal Friendship Association, Khandhbari medical project, children welfare projects, CUNINA, and Luc Sallen Group. There is an association called "Nepal Sanskritik Samaj" formed mainly by Nepalese nationals residing in Belgium that organizes Nepali cultural programmes during the major festivities. In 2002, Government of Nepal requested the Government of Belgium to provide assistance for strengthening communication navigation service system and airfield lighting at various airports in Nepal. The response from the Belgian government has been positive. The Belgian assistance would take the form of state-to-state loan once the commercial negotiation of the mixed credit between the Belgian Company ADB and the Nepalese authorities is completed.

In March 2003 the Government of Belgium agreed to provide a loan assistance of euros 1,439,637 to Government of Nepal as the fourth and final instalment of Belgian state-to-state loan under the sixth telecommunication project agreement signed in 1990 with a committed loan assistance of 8,496,977 euros over a period of four years. Of the total committed loan, 7,057,340 euros have already been received under three separate loan agreement concluded between 1999 and 2001. The loan assistance is being utilized for the purchase and installation of telecommunications equipment for the extension of 150,000 lines under the sixth telecommunications project being implemented by the NTC. The loan carries no interest with the repayment period of 30 years including a grace period of 10 years. The Royal Nepalese Embassy in Brussels initiated discussion with ALCATEL Bell (Belgian Telecommunication Production Company) to extend the cooperation beyond its traditional mode of cooperation to include some innovative programs such as E-learning in Nepal.

Economic Cooperation
Efforts are being made towards developing economic relations with Belgium through establishment of relations with the leading Chambers of Commerce and Industries to explore business opportunities and cooperation between the private sectors in the two countries. In December 2002 Central Carpet Industries Association of Nepal participated in an international fair and exhibited Nepalese hand-knitted carpets at the Bouwcentrum of Antwerp, Belgium. It was an opportunity to promote Nepalese carpets in the Belgian market. Nepal hosted the 10th Belasia Fair in February 2002 at Wimmel, Belgium which was a very good opportunity for Nepal for its tourism promotion. Eighty-eight organizations from different Asian countries actively participated in the fair. There were altogether 10 Nepalese stalls including Nepal Tourism Board. Few magazines like De Zandloper and Belasia special issue gave a wide coverage about the fair with special publicity on Nepal.

Trade
Nepal exports carpet, woollen goods, ready-made garments, handmade papers, handicrafts etc., to Belgium. Similarly, Nepal imports textile materials, vaccines for human medicine, vitamins and their derivatives, machinery and parts, industrial raw materials, electrical goods, research equipment etc., from Belgium. Nepal's imports from Belgium in Fiscal Year 2000/2001 and 2001/2002 were worth Rs. 517.1 million and 398.5 million respectively. Similarly Nepal's exports to Belgium in those years were worth Rs. 392 million and 295.1 million respectively.

Nepal purchased some arms from a Belgian company in 2002/03. This generated hot parliamentary debate in 2002 and a senior Minister of Belgian Government subsequently resigned from her post. A vote of no-confidence was also brought, but the Government survived. However, this led to the Belgian Government to handover the matters relating to arms supply within the purview of the Regional governments of Belgium.

In view of the major role being played by Belgium in the European Union (EU), the prospects of cooperative relations between Nepal and the EU is expected to receive added impetus through excellent economic and trade relations with Belgium.

Nepal's Trade Balance with Belgium:

Value in Rs. '000
Year Export Import Balance
2000/2001 392,079 517,197 - 125,118
2001/2002 295,140 398,551 - 103,411
2002/2003 230,452 1,444,046 - 1,213,594
2003/2004 260,948 1,125,636 - 864,688

Scholarship
Belgium has been providing scholarships to a limited number of Nepali students selected on competitive basis. Education and scholarship related matters in Belgium fall under the jurisdiction of regional governments. More opportunities might be available to Nepalese students if there are cooperation agreements with regional governments of Belgium. The matter is being pursued with the regional governments.

Tourism
A significant number of tourists arrive in Nepal from Belgium each year. The following figures show the tourist arrivals from Belgium in recent years.