If anyone was planning this, we would have to hand it to them for doing a systematic and thorough job of dismantling what is left of Nepal's economy.

Tourism, investment and government revenue had already been severely hit in the past four years. But the Valley blockade, threats against Nepal's biggest companies, the sabotage of Nepal Lever and the warning to American-owned investments have, in just one month, wiped out a large chunk of the economy.

The only sector still capable of bailing us out was overseas remittances. The killing of the 12 Nepalis in Iraq last week and its riotous fallout in Kathmandu destroyed that last hope.

Nepali workers in the Gulf, India and East Asia send home an estimated $1 billion each year-as much as the annual national budget. The backlash against Muslims in Kathmandu has recieved wide play in the Arab media and this will surely reduce the numbers going to the Gulf. In addition, the destruction of 80 percent of the recruitment agencies in Kathmandu means it will be months, if not years, before recruitment levels for overseas labour gets back to normal. Many labour recruiters say the attacks were not outbursts of spontaneous anger but a systematic and deliberate attempt to destroy the manpower industry.

"It's a big challenge for us to begin our business afresh," said Nirmal Gurung, president of the Nepal Foreign Employment Agents' Association. "More than 300 of the 500 manpower agencies registered with us have been destroyed and the initial estimation of the loss is Rs 2 billion."

One dejected member said, "Many of our members are so demoralised after the attacks that they have decided to quit the profession altogether."

The Association of Manpower agencies has formed two committees, one for the assessment of the losses due to vandalism and the other to pressure the government to provide compensation and security.

More than 6,000 Iraq-bound Nepalis have already returned from Mumbai, the fate of the 15,000 Nepalis already in Iraq hangs in the balance and there are tens of thousands more who were getting ready to take the back door to Iraq stranded in India, Kuwait and Jordan. During the vandalism, thousands of passports were either burnt or misplaced, which means many would not be in a position to reapply for foreign jobs immediately. The government has not made any commitment to get new passports for these people.

"The fallout has been disastrous for the remittance industry," says economist Biswamber Pyakurel. "Suspicions in the employing countries will continue to deepen and that will harm our remittance economy significantly."

Pyakurel notes that increased restrictions on the movement of migrant workers due to terrorism has already resulted in a worldwide decline in remittances. "It is happening everywhere," he says. "That is why it would not be wise to make our economy depend even more on remittances."

That may be a longterm strategy, but for the moment foreign employment is a safety valve for the Nepali economy. The conflict itself is a vicious cycle. As long as there is no peace, there will be no investment, which means there will be no new jobs, and people will be forced to go abroad for work.

The government is in a dilemma. Before this crisis broke, officials were actually planning to legalise the process of working in Iraq, since so many were duped by Indian middlemen and were taking the back door anyway. Now it can't do that, but it is also powerless to stop Nepalis from landing up in Iraq once they get to the Gulf.

Even before the riots, the government had cancelled the licenses of around 110 allegedly illegal manpower agencies, including Moonlight Consultant, which had sent out nine of the 12 Nepalis who were killed. The government has also formed a committee to formulate a policy on foreign employment. Now, the government is trapped, either way there is no real hope of immediately reviving an industry that the country depends on for survival.