Foreign policy and defense
Nepal is a nation in Southern Asia. Its capital city is Kathmandu. Foreign policy is characterized by a balance between China and India. Largest is the dependence of India which encloses Nepal on three sides. However, Chinese influence can be said to increase.
The exchange with India is large and most of Nepal’s trade and contacts with the rest of the world go through neighboring countries. But relationships are strained periodically; Nepal has constantly tried to assert its political and economic independence.
- Countryaah: Overview of business holidays and various national observances in Nepal for years of 2020, 2021, 2022, 2023, 2024 and 2025.
Nepal and India have signed trade and transit agreements that give Nepal duty free in India and the possibility of transporting goods to ports in Bangladesh. Agreements have also been made on the joint use of water resources.
During the civil war in Nepal 1996–2006, India became an important ally for the government side, as domestic Maoist rebels also worried the authorities in New Delhi. India delivered weapons to the Nepalese army and seized high-ranking Nepalese Maoists in 2004. Unsurprisingly, relations deteriorated when a Maoist-led government took office in Kathmandu in 2008. They soon strengthened again and from 2013 India resumed its arms deliveries to Nepal.
India supported Nepal with money as well as soldiers in the rescue work that followed the severe earthquake in the Kathmandu Valley in the spring of 2015. At the same time, relations deteriorated during the year as India expressed its support for indiscriminate madhesi groups and in protest against the new constitution blocked roads into India.
With dissatisfaction, India is looking at Beijing’s ambitions to connect Central Asia and South Asia more closely through low-cost loans for extensive infrastructure projects. Nepal is also receiving Chinese support to develop infrastructure such as roads and bridges, something that is greatly needed after the earthquake disaster.
The United States and Britain also supported the king militarily and the United States terrorized the Maoist guerrillas during the war. In recent years, the United States has increased its assistance to Nepal and in 2012 the Maoists were removed from the US list of terrorist organizations. After the 2015 earthquake, the United States was one of the countries that provided the most help and assistance. Bilateral trade has also increased.
Relations with other Western countries have generally been good. The UK and the rest of the EU were quick to pledge aid when the peace process took off in 2006.
Since Tibet’s conflicts were settled in the 1950s, relations with China have been predominantly good. Nepal has restricted the ability of Tibetan refugees to act politically, and the Chinese government distanced itself from the Nepalese Maoists when forming a banned guerrilla group.
Since the mid-2010s, economic cooperation between the two countries has increased significantly. China’s official assistance to Nepal fivefold between 2014/2015 and 2015/2016, from $ 24 million to $ 128 million. In the same year, China took over India’s place as the country that makes the most direct investment in Nepal.
China also responded quickly to Nepal’s plea for help after the 2015 earthquake and contributed, among other things, with tents and medical personnel and equipment. Shortly thereafter, an agreement was signed on both aid and investment from China to Nepal.
In March 2016, Prime Minister KP Oli visited Beijing, where the two countries signed a series of bilateral agreements. One important such was giving Nepal access to Chinese ports, which was expected to reduce Nepal’s dependence on India for trade with the outside world. In the same year, bilateral trade with China increased by 24 percent.
In April 2017, China and Nepal conducted their first joint military exercise. A month later, the countries signed the framework for Nepal’s participation in China’s huge infrastructure initiative, the new Belt and Road Initiative. As part of this, a new freight railroad has been built between Guangdong in southeastern China and Kathmandu, via Xigaze in Tibet.
Cooperation between the two countries was further strengthened when Chinese President Xi Jinping visited Nepal in October 2019, the first Chinese state visit in 23 years in the country. Xi then pledged nearly half a billion dollars more in financial aid, between 2020 and 2022, to “raise the standard of living of the Nepalese”. A decision was made to build a new railway and a tunnel across the Sino-Nepalese border. Collaboration agreements on hydropower, security, trade and education were also signed.
Relations with Bhutan have been strained since the 1990s, when about 100,000 Bhutanese of Nepalese origin fled persecution to Nepal. The refugees were placed in UN-supported camps and were not allowed to settle in Nepal. Under the auspices of the UN, the majority of refugees have been relocated to western countries, primarily the United States, but at the beginning of 2018, approximately 8,500 were still in two camps.
With Bangladesh, Nepal is cooperating on the availability of water in the rivers that flow from the Himalayas to the Gulf of Bengal. Bangladesh invests in Nepalese hydroelectric power to buy electricity from it. Nepal may also use Bangladeshi ports for its foreign trade.
Nepal has been a member of the UN since 1955. The country was a founding member of the regional cooperation organization Saarc (South Asian Association for Regional Cooperation), which is headquartered in Kathmandu. The Saarland countries have signed the Safta (South Asian Free Trade Area) Free Trade Agreement. Nepal is also part of another regional cooperation organization, Bimstec (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation).
Nepal’s army consists of professional soldiers. They are usually hired for ten years and receive the same salary as government officials, which attracts many. Since the 19th century, Nepalese Cucumber soldiers (see Population and Languages) have been recruited to foreign armies, especially in India and the United Kingdom. In total, there are tens of thousands of Nepalese in foreign service. Nepal is also one of the most diligent participants in UN peacekeeping efforts.
During the Civil War, the defense was heavily equipped. After the war, the task was to wrestle the army and at the same time incorporate parts of the armed forces of the Maoist guerrillas. Both the army and the former guerrillas were monitored by the UN until January 2011 when the Nepalese government decided not to extend the mandate of the UN mission.
FACTS – DEFENSE
Army: 96 600 men (2017)
Military expenditure’s share of GDP: 1.6 percent (2017)
Military spending’s share of the state budget: 5.8 percent (2017)