American foreign policy interests in Nepal have sought to strengthen democracy and to prevent the collapse of Nepal which, should it become a failed state, could provide a base of support for terrorists or insurgents in the region. Political instability and insurgency-related violence has undermined the country's economy. Recent Developments

On April 24, 2006, mounting popular resistance in support of the political parties led King Gyanendra to hand over power to the Seven Party Alliance. With this development, Nepal began a process that promises to end a period of intense political conflict between the king and the political parties, and armed struggle with the Maoists. Under the peace agreement, constituent assembly elections were to be held by the end of June 2007. According to one source, the "Maoists appear to be the most organized political force in the country" and the seven party alliance has "a history of bickering among themselves, a weakness that both the Maoists and the royalists would be quick to exploit." There is also growing concern that the constituent assembly election be held as soon as possible. Unrest in the Terai, including demands for greater political representation in parliament, remains unresolved. Maoist leader Prachanda, who has not taken a seat in parliament, addressed a Maoist rally in February 2007 and called for Nepal to become a republic. Under the previously negotiated agreement, it is up to the constituent assembly to decide the fate of the king and disposition of the government. New Unrest

The most recent threat to the political stability of Nepal stems from a number of groups representing Madhesis of the Terai region in southern Nepal. Two Maoist splinter groups are thought to be fomenting violence in the Terai by attacking police stations and sponsoring strikes while other groups unrelated to the Maoists have also been using violent means, such as blockade of customs stations and transport strikes, to attract attention to their cause and put pressure on the government to address their concerns. Under Resolution 1740, UNMIN will undertake the following tasks:
Monitor the management of arms and armed personnel of both sides; Assist the parties through the Joint Monitoring Coordinating Committee in implementing their agreement; Assist in the monitoring of the cease fire; Provide technical support for the planning, preparation and conduct of the election of a Constituent Assembly; and Provide a small team of election monitors. In this way they seek to achieve politically what they have been unable to gain on the battlefield. Many observers felt that a military solution to the conflict with the Maoists was not achievable and that a concerted effort by the king and the democrats was needed to establish a unified front to defeat the Maoists. Key Country Issues

		Governance

Nepal, the world's only officially Hindu country, has been an independent kingdom since 1768. This government drafted a constitution in November 1990 establishing Nepal as a parliamentary democracy with a constitutional monarch as head of state. The Kathmandu government faced additional turmoil in June 2001, when Crown Prince Dipendra reportedly shot and killed his parents, King Birendra and Queen Aishwarya, seven other members of the royal family, and himself after a disagreement over whom he should marry. Amnesty has called for an investigation into these events. The Economy

Nepal is one of the poorest countries in the world. The United States apparently supported India in taking a leading role in the situation in Nepal in the wake of the February 2005 takeover by the king. U.S.
The three-way contest for control of Nepal—among King Gyanendra, a coalition of seven parties seeking democracy for the country, and the Maoists—ended with the king relinquishing power to the democrats in April 2006 after large scale popular demonstrations against him. King Gyanendra's inability to subdue the Maoist insurgency and his repression of pro-democratic elements in the country undermined his legitimacy and led to his fall from power. The United States sought to assist the government of Nepal in its struggle against the Maoist armed insurgency and has promoted the democratic development of Nepal. It has also sought to promote stability in Nepal to keep it from becoming a destabilizing element in the region.
This shift of power from monarchy to democracy was followed in November 2006 by a peace agreement between the Maoists and the new government which led to the laying down of arms, a parliament that includes Maoists, and the scheduling of elections for a constituent assembly. The constituent assembly is to address the question of whether the king is to have a place in the future government of Nepal and, if so, to what extent. The constituent assembly is also expected to act on calls for Nepal to become a republic and redraw constituencies to more equitably represent the Nepali people, particularly in the Terai in southern Nepal, which experienced much unrest in 2007.
A landlocked Himalayan kingdom between India and China, Nepal ranks among the world's poorest countries. In 1990, following a democratization movement, it became a parliamentary democracy under a constitutional monarch. Although this led to a process of economic restructuring and market liberalization, the country's economic growth and reform effort was undercut by political instability and years of increasingly dire internal security challenges brought on by the civil war with the Maoists. Compounding the country's difficulties was the June 2001 tragedy in which ten members of the royal family, including King Birendra, were killed in an assassination-suicide, reportedly carried out by Crown Prince Dipendra.
Nepal has a long way to go before its democratic gains can be effectively consolidated. The need to more fully integrate the Maoists into the political process and ensure that they, or any splinter groups, do not resort to the force of arms or coercion in the lead-up to the constituent assembly elections remains a key challenge. In addition, mounting political tension over Madhesi calls for greater representation in the political process will demand attention. The Madhesis are an indigenous ethnic group that inhabit the lowlands of Nepal who feel they have not been fairly represented. Some Madhesi demonstrations have turned violent. The need to develop the economy and bring prosperity to the people will remain whatever the outcome of the constituent assembly election.