Nov. 20 (Bloomberg) -- Nepal's Maoists, who won power this year after a decade-long civil war, meet today to chart the path of their revolution with leaders ideologically split over whether to maintain a free market or impose state control.

Puspa Kamal Dahal, the Maoist leader and prime minister, has pledged to remove barriers to foreign investment and wants the Himalayan nation to remain a multiparty democracy. Hardliners are pushing for single-party rule and a state-controlled economy.

Divisions within the Communist Party of Nepal (Maoist), which leads a coalition government, could impact on the peace process as lawmakers draft a new constitution for the nation sandwiched between India and China.

``We have differences in the party'' over its ``future strategy and tactics,'' Chandra Prakash Gajurel, foreign affairs chief for the CPN (Maoist), said by telephone from the capital, Kathmandu, before today's national convention of 1,000 cadres.

The Maoists fought for 10 years to overthrow the monarchy, before signing a peace accord in 2006 and withdrawing their fighters to camps under United Nations supervision.

They joined the political mainstream and won most seats in April parliamentary elections. The first act of the new national assembly was to declare the nation a republic, ending King Gyanendra's 240-year-old dynasty.

The peace process was a victory for moderates in the party, Ashok Mehta, author of ``Indo-Nepal Relations: The Challenge Ahead,'' said in a telephone interview from New Delhi.

`Fierce One'

The prime minister, whose nom de guerre Prachanda means ``Fierce One,'' wants to drop Maoist from the party's name to break with its guerrilla past and reassure the public that fighters won't again take up arms, said Mehta.

About 20,000 members of the rebel People's Liberation Army are living in forest camps as the government seeks to integrate them into the army. Nepal's military said in April it didn't want to accept the fighters immediately because they were still politically motivated.

During his first official visit to India in September, Dahal pledged ``investment-friendly policies'' and said his party would be a ``leading force in economic development.''

The civil war, which left 13,000 people dead, stifled Nepal's tourism-dependent economy. It is among the world's 50 least-developed nations, according to the UN, and about a third of its 26.4 million people live below the poverty line.

The government has forecast the economy to grow at 5.5 percent in the 2009 fiscal year ending July, according to the Asian Development Bank. It grew an average of 2.8 percent over the past three years.

Free Market

Dahal is committed to a free market while also wanting to revive under-performing state enterprises, Sagar Prasai of the Asia Foundation, an advocacy group that promotes democratic governance, said by telephone from Kathmandu.

``The perception so far is that they are a market-friendly group and the finance minister recently went to the U.S. and assured everyone,'' Prasai said.

Hardliners, led by senior Maoist official Mohan Baidya, are agitating against Dahal's policies. They want a communist ``people's republic'' run by a single party and all economic activities to be controlled by the state, Mehta said.

The party's 35-member central committee held three days of talks this week in an effort to resolve the dispute. Dahal has tried to pacify his opponents, saying that in elections to be held in 2010 under a new constitution the party could win two- thirds of votes, effectively meaning single-party rule.

Leaders will meet again today before the convention, where cadres will debate the party's policies, Nepalnews.com reported.

The prime minister has created a sufficient number of ``fence sitters'' by giving them posts in government to maintain control of the party for now, Prasai said. Nevertheless, ``there is discontent in the party which could at a later point become a strong enough force to disrupt the power balance.''

To contact the reporter on this story: Jay Shankar in Bangalore at jshankar1@bloomberg.net

Last Updated: November 19, 2008 18:31 EST