By Gopal Sharma
KATHMANDU (Reuters) - Nepal's parliament elected a Maoist leader as prime minister on Sunday after weeks of failure by lawmakers to form a national unity government that has threatened a fragile peace process in the nascent Himalayan republic.
The election of Baburam Bhattarai, a senior leader of the former rebels who waged an armed insurgency against the now-toppled monarchy, follows two years of turmoil in South Asia's poorest nation where Asian superpowers China and India jostle for influence.
Bhattarai faces the twin challenge of integrating and rehabilitating more than 19,000 former guerrillas and must oversee preparation of the first republican constitution, two major conditions of a 2006 peace deal which ended a decade-long civil war that killed 16,000 people.
"Completing the peace process and preparing the new constitution are my priorities. Number three is providing relief to the people," Bhattarai said after his election, his faced smeared with vermilion and marigold garlands around his neck.
His appointment is seen easing a political impasse in Nepal, which has struggled through two years of stalemate since the former rebels quit the government in a conflict with the president over the control of the national army.
Nepal has potential to generate hydroelectric power and is courted by neighbors India and China as a geopolitical ally, but instability has spooked investors and distracted parliament in a country struggling with near-double digit inflation.
Bhattarai, whose United Communist Party of Nepal (Maoist) has 236 lawmakers in the 601-seat parliament, defeated Ram Chandra Poudel of the Nepali Congress by 340 votes to 235, after clinching a power-sharing deal with several regional parties.
The 57-year-old India-educated Maoist ideologue, whose party has exposed a largely reformist and social democratic agenda, replaces Jhalanath Khanal, a moderate communist who resigned two weeks ago after six months in office having failed to advance the tortuous peace process.
His election raises hopes for a revival of the edgy peace process and could settle the future of Maoist combatants, which the Brussels-based International Crisis Group (ICG) says is crucial to reducing two standing armies to one.
Bhattarai is considered number two to party chief Prachanda and was on the nation's most wanted list with a price of $70,000 on his head during the conflict. He was finance minister in a short-lived coalition after the former rebels secured a surprise win in the 2008 election.
Nepal, home to Mount Everest and the birthplace of Lord Buddha, sits on the source of rivers supplying water to millions in South Asia. The country stands to reap the benefits from its borders with the world's two fastest-growing economies, U.S. Ambassador Scott H. DeLisi said recently.
But GDP growth stood at 3.5 percent this year, the lowest in four years, and tens of thousands of frustrated young Nepalis leave the country to seek menial work in Korea, Malaysia and the Middle East every year.
(Editing by Henry Foy)