Nepal

Nepal exists because the Himalayas exist—the collision of the Indian and Eurasian plates created not just the world's highest mountains but also the buffer state that survived between British India and Qing China when nearly all others were absorbed. That geographic accident still defines Nepal's economy today.

Before unification, Nepal was a mosaic of 54 independent kingdoms and principalities scattered across the hills and valleys. The Malla kings ruled the three competing city-states of the Kathmandu Valley—Kathmandu, Patan, and Bhaktapur—wealthy from trans-Himalayan trade between Tibet and India. In 1768, Prithvi Narayan Shah, the king of tiny Gorkha, conquered Kathmandu during the Indra Jatra festival, beginning the unification that would create modern Nepal. His successors expanded aggressively into Tibet and British India, provoking the Anglo-Nepalese War of 1814-16. The resulting Treaty of Sugauli cost Nepal the territories of Sikkim and much of the Terai, but preserved independence—unlike every other Himalayan kingdom, which eventually fell to either Britain or China.

The price of independence was isolation. The Rana dynasty (1846-1951) ruled as hereditary prime ministers while keeping the Shah kings as figureheads, maintaining Nepal as a closed kingdom to preserve their power. When King Tribhuvan fled to India in 1950, triggering revolution, Nepal had virtually no modern infrastructure, no university, and minimal literacy. The Shah monarchs regained power but struggled with development. The democratic movement of 1990 established constitutional monarchy; the Maoist insurgency of 1996-2006 killed over 17,000. In 2008, Nepal abolished its 240-year-old monarchy and became a federal republic. Political instability has been constant—Nepal has had over 30 governments since 1990.

Today, Nepal's economy runs on remittances. Workers in Qatar, Malaysia, Saudi Arabia, and India send home 25-30% of GDP—one of the highest ratios in the world. This flow has nearly eradicated extreme poverty but created deep dependency: the economy exports labor rather than goods. Hydropower offers transformation: at 3,700 MW installed capacity, Nepal exports electricity to India, with theoretical potential of 40,000 MW in Himalayan rivers. GDP grew 4.6% in FY25, and tourism recovered to 1 million visitors. India dominates: $750-800 million cumulative investment, $1.2 billion annual remittances. But September 2025 unrest—the Genji agitation that spiraled into arson and looting—will slow growth to 2.1% in FY26.

By 2026, Nepal tests whether hydropower exports can reduce remittance dependency, or whether political instability will derail the transition. The same mountains that preserved independence now constrain infrastructure development—building transmission lines through Himalayan terrain costs more per kilometer than almost anywhere on Earth.