After assuming office as the 47th President of the United States, Donald Trump announced a private sector investment of up to $500 billion to develop artificial intelligence (AI) infrastructure, aiming to outpace global competitors in this business-critical technology. Within a week of President Trump’s announcement, the Chinese AI bot DeepSeek delivered a major surprise to OpenAI, triggering a significant drop in the stock prices of the American technology company Nvidia.
This is a clear example of how countries worldwide are aggressively investing in IT infrastructure to stay competitive. Innovation and technological advancements are crucial for companies, providing the necessary momentum to minimise costs and maximise profits. Economies across the globe are leveraging technology to drive growth and create new opportunities.
The intense competition among global tech giants presents an opportunity for Nepal, as Nepali talents and IT companies can collaborate with leading technology firms from the United States, China, and beyond. Rajesh Kumar Agrawal, President of the Confederation of Nepalese Industries (CNI), has stated that IT will be Nepal’s major unique selling proposition (USP).
Citing a 2023 study by the Institute of Integrated Development Studies (IIDS), Agrawal highlighted that Nepal’s IT service export (ITeS) industry is valued at approximately $515 million. The study found that 106 IT service export companies are operating in Nepal, alongside 14,728 IT freelancers specialising in software development and technology, and 51,781 ITeS freelancers providing IT services through various digital platforms.
It has highlighted the tremendous potential for IT service development in the country, where a large number of talented individuals are involved.
The study stated that total IT service exports reached $515 million in 2022, representing 64.2% growth since 2021. “Both IT companies and freelancers experienced substantial growth, with IT companies recording an 80.5% increase in service exports and freelancers achieving 55.2% growth compared to the previous year,” the study reports.
“The ICT sector, though largely under-reported, is Nepal’s largest export contributor so far. This potential was explored by talented individuals themselves, engaging our talents in a big way,” Agrawal remarked. “The IT sector will thrive under a conducive investment climate, and Nepal has the potential to be a back office and data centre for major global companies.”
Furthermore, there is equal export potential, as there are no tariff or non-tariff barriers.
The recent ordinance introduced by the government, amending several investment-related laws, has created space for IT companies to grow. With the implementation of the ordinance, Nepali IT firms will be allowed to establish representative offices in foreign countries. Through these offices, they can explore opportunities, forge collaborations with tech giants, and conduct promotional activities for their products, according to Santosh Koirala, President of Nepal Association for Software and IT Services Companies (NAS-IT).
“Establishing direct relationships with tech giants or procurers of IT products will end the prevailing practice of paying high charges to mediator firms for using their platforms to sell products,” as per Koirala.
Why is Nepal lagging behind?
While Nepal has made significant strides in adopting technology across various sectors, challenges related to infrastructure, education and digital literacy persist. To fully realise the potential of technology, the government and private sector must invest in improving connectivity, digital skills, and providing greater access to technology for remote communities. Furthermore, entrepreneurs have highlighted several crucial aspects that need to be addressed to create a foundation for the IT sector to thrive.
Creating a congenial environment for investment in the IT sector and enabling infrastructure development requires legal, procedural and institutional reforms, along with new investments. IT entrepreneurs have flagged some of the critical issues they face. Just a few years ago, the government waived the minimum investment threshold for IT and allowed 100% foreign investment through the fiscal budget. However, the amendment of the Foreign Investment and Technology Transfer Act (FITTA) – the principal act for foreign investment – did not address this, creating confusion among investors.
Entrepreneurs have remarked that the lack of an enabling environment – including inconsistent policies, inconsistent tax incentives, and a lack of adequate and skilled human resources – is hindering their competitiveness. Many Nepali IT firms have reportedly relocated to India due to various barriers that hampered their agility while operating in Nepal. A lack of a dynamic ICT policy to facilitate this sector, procedural complexities requiring engagement with multiple agencies, and stringent criteria for accessing foreign exchange facilities are reported as the biggest barriers they face in Nepal. Moreover, Know Your Customer (KYC) requirements, including information on the Board of Directors, are needed for obtaining credit from banks and financial institutions in Nepal. In this context, the mindset and capacity to envision the importance of IT sector development from the government and regulatory side are questionable.
Many countries globally are attracting entrepreneurs and tech enthusiasts with lucrative incentives. However, stringent laws, a lack of investment in infrastructure, and a lack of readiness to leverage technology to deliver public services efficiently, along with low public enthusiasm for embracing technology, have been observed.
Robust infrastructure
Fundamental infrastructure for IT sector development is robust internet connectivity. In recent years, Nepal has seen an expansion in mobile networks, and the introduction of 4G networks has significantly improved communication across urban and rural areas. Simultaneously, internet penetration has increased with the rise of affordable data plans, making access to information more widespread. Internet use has particularly grown in urban areas.
Dr. Purna Bahadur Nepali, Associate Professor and Head of the Department of Public Policy and Management, and Master of Public Policy and Management (MPPM) programme at Kathmandu University School of Management (KU SOM), shared that they experienced challenges running virtual classes during the COVID-19 pandemic due to a lack of robust internet connectivity nationwide. “Students in semi-urban and rural districts faced challenges with internet slowdowns and intermittent disruptions; we couldn’t make classes as effective as anticipated,” he shared.
While internet access has improved in urban areas, rural regions still face connectivity issues, limiting access to digital tools and services. A significant disparity in technology adoption exists between urban and rural populations. Lower digital literacy in rural areas and limited access to devices create a gap. For rolling out any digitalisation scheme, internet quality is the fundamental infrastructure needed to move forward. Technology adaptation depends not only on infrastructure but also on user readiness.
Nepal has yet to fully exploit technology to streamline services. In particular, the full-fledged use of technology for delivering public services has been impeded by redundant laws, bureaucratic unwillingness and a lack of robust infrastructure.
Readiness to adopt technology
As of February 2024, Nepal reportedly has 15.4 million active internet users. However, the benefits of internet connectivity are vastly different between urban and rural areas. “The internet is the infrastructure that can make Nepal extremely competitive with the rest of the world,” said Ajit Bikram Shah, Director and Chief Executive Officer of Lotus Holdings. “All stakeholders should constantly work on expanding internet access to the entire population – it substantially increases the probability of growth.”
The government envisions technology and infrastructure as the foundation for creating an enabling environment for the success of Digital Nepal initiatives, along with talent and skills development. Digital connectivity in Nepal has improved considerably in recent years due to the rapid adoption of mobile internet, as per the Digital Nepal Framework, 2019. “However, it continues to lag behind its neighbours and developed economies in the overall development of the IT sector.”
Emphasis has been placed on compulsory IT education for schools and colleges; Geospatial/GIS education for schools and colleges; and systematically strengthening Nepal’s education system’s capacity to impart advanced ICT education. ICT literacy programmes aimed at combating digital exclusion in rural communities and among underprivileged Nepalis are also prioritised to fill the talent and skill gap for IT sector development.
Looking at 2025 internet penetration forecasts, Nepal is expected to surpass China and India. In Nepal, internet penetration is projected to reach 79% of the population; however, 95% of internet users utilise 2G/3G and 4G networks. The Digital Nepal Framework envisions unlocking the economy’s potential through digitalisation. It encompasses 80 different digitalisation initiatives across eight sectors: agriculture, health, education, energy, tourism, finance, urban infrastructure and digital foundation.
The estimated total impact of the Digital Nepal initiatives is US$8 billion (NPR800 billion) upon full implementation of programmes across various sectors. These include capital investment in ICT; capital infusion in the form of government funding across different programmes (estimated to be over US$300 million over 10 years); e-governance and cost savings; job creation and skill development; the development of ICT as an enabler in agriculture; and increased workforce efficiency and lower equipment costs (capital deepening).
The Digital Nepal Framework emphasises the urgent need for investment in the rapid build-up of basic infrastructure, including fibre cables, telecom setup, skilling and re-skilling, research and development, industry development, the inclusion of rural areas in the IT network, and the implementation of e-governance programmes. Moreover, the Framework underlined the need of robust infrastructure in a short span of time will also allow Nepal to attract potential FDI sources in different sectors early on. The government’s main focus and responsibility would be to expand infrastructure outside urban centres, as private players may find it economically unviable due to the longer gestation period.
Nepal’s technology adaptation status
Technology adaptation in Nepal has been progressing steadily, though it faces the aforementioned challenges. While the country has witnessed significant growth in technology adoption across various sectors, it still struggles with issues like infrastructure gaps, limited digital literacy, and a lack of resources. Moreover, individuals and companies may be reluctant to adopt new technologies due to data security concerns and the high cost of replacing older technologies, as well as the need to train staff.
One of the lasting impacts of COVID-19 is the adoption of digital technology in the provision of banking services and the wider use of digital services in daily transactions, such as retail shopping, fee and charge payments, and paperless services. The digital trail created by smartphones has made it possible for even farmers and transporters to carry out e-transactions due to safety reasons and the inherent benefits of saving time and transaction costs.
“The use of digital technology in providing financial services is supposed to enhance the capacity of the general public to enjoy the privileges and rights guaranteed by the constitution,” according to Purushottam Ojha, former secretary of the Government of Nepal. “However, a word of caution lies in the potential deprivation of a large swath of people who are still digitally illiterate and cannot afford smartphones.” Hence, expanding digital literacy and the affordability of services should be prioritised in the government’s development agenda.
Furthermore, health systems collapsed everywhere during the COVID-19 pandemic. However, most developed countries effectively delivered education through digital platforms, without impacting student learning. In contrast, there was a vast difference in student learning in Nepal and other underdeveloped nations. Recognising the gaps in delivering effective education through virtual platforms, an initiative has been taken to develop digital pedagogy and train teachers. “Teaching methods for the virtual platform are completely different for grabbing students’ attention and enhancing their learning,” remarked Prashanta Dhakal, Leader and Project Coordinator of the New Way to a Sustainable Transformational Educational Programme. This programme, started 21 months ago, aims to develop and share digital pedagogy, build the ecosystem, and develop entrepreneurship by nurturing entrepreneurial skills among students.
Sindhuli Multiple Campus has been working as the coordinator with various academic institutions to drive digital transformation in the education system. Reportedly, they are partnering with two European universities – Turku University of Applied Sciences (TUAS), Finland and Universitat Politècnica de València (UPV), Spain– along with Siddhartha Vanasthali Institute (SVI), Nepal, and Padma Kanya Multiple Campus, a constituent campus of Tribhuvan University (PK-TU); Sindhuli Community Technical Institute (SCTI), Nepal, and Sindhuli Academy to implement this Sustainable Transformational Educational Programme, according to Dhakal.
Various other transformative initiatives are being undertaken in different sectors, such as agriculture, transport (ride-sharing), e-commerce, tourism and energy, among others.
For example, Geokrishi has made a transformative change in the agriculture sector. Geokrishi is a web and mobile application designed specifically for farmers, aiming to assist them in producing safe and organic food. It provides access to crucial agricultural information, including weather updates, crop suitability assessments, pest management advice, and market insights, all tailored to their specific location through geo-location technology.
In addition, there are multiple applications/platforms for ride-sharing, e-commerce, and fintech, among others. For example, the implementation of Application Supported by Blocked Amount (ASBA) and C-ASBA has increased investor participation in public (IPO)/rights issues.
Moreover, the government has introduced the Nagarik App to provide various public services to citizens efficiently. The Nagarik App is a mobile application launched by the Government of Nepal to provide government-related services on a single online platform. It offers these services through a unified platform, minimising the need for citizens to navigate multiple channels or physical offices. According to the Ministry of Communication and Information Technology, services are being added gradually according to the needs and services required. “From this app, people can access services online around the clock, even during holidays.”
The government has established an E-governance Board to promote digitalisation in government functions and public service delivery, and to enhance the credibility and security (data protection) of those services.
Digitalisation has significantly transformed the landscape of market access for producers of goods and services. Payment Service Providers (PSPs) have played a crucial role as enablers of e-commerce development. A transformational shift in banking and fintech services has been observed following the COVID-19 pandemic, almost as a blessing in disguise.
Access to Digital Payment System
The penetration of internet and smartphones has created new solutions and abundant opportunities. People are exploring innovative business methods by leveraging technology, not only in fintech and e-commerce. Telemedicine, e-prescriptions, and appointments and consultations with doctors/health professionals have been widely adopted in the health sector. Research and development are underway to facilitate health services by employing AI in the future.
In short, there is a significant push toward creating smart cities, with the goal of integrating technology into urban infrastructure to enhance people’s quality of life. Furthermore, Nepal’s startup ecosystem is emerging, with increasing interest in tech-based solutions for e-commerce, agri-tech, fintech and education.
Technological disruptions and future of work
Technological disruptions have changed how public offices and private firms operate, and how services are delivered. In Nepal, given that we have both ultra-urban and completely rural areas, and everything in between, all are integrating IT across most platforms of their businesses.
A recent World Economic Forum report highlighted that technological disruptions will intensify in the coming years, leading to a significant workplace transformation by 2030.
The World Economic Forum’s (WEF) Future of Jobs Report 2025 outlines the transformative shifts anticipated in the global labour market by 2030, driven by rapid technological advancements, the green transition, economic uncertainty, and demographic changes. Based on a survey of over 1,000 global employers, representing 14 million workers across 22 industries and 55 economies, the report offers a detailed roadmap for businesses and policymakers.
It highlights that generative AI and robotics are expected to be pivotal, with 86% of businesses foreseeing significant disruption from AI technologies. Jobs such as AI specialists, software developers, and renewable energy engineers will grow rapidly, while clerical roles face steep declines due to automation.
Along with technological transformation, a new job market landscape will emerge, with the creation of new jobs and the displacement of jobs that can be easily automated. “By 2030, 170 million jobs could be created globally, while 92 million are at risk of displacement, resulting in a net gain of 78 million jobs,” according to the WEF report. “Sustainability-focused roles, including renewable energy engineers, will see significant growth. However, gaps in green skills may hinder achieving climate goals.”
The report further underlines that demographic shifts will drive job creation, as ageing populations in high-income countries will drive demand for healthcare professionals, while growing youth populations in lower-income regions highlight the need for robust job creation strategies.
According to the report, nearly 40% of the skills required for jobs today will evolve by 2030. Resilience, analytical thinking and adaptability will remain critical, alongside growing demand for AI and cybersecurity skills.
“Skill gaps remain the primary challenge for businesses. About 85% of employers plan reskilling initiatives, while 40% expect workforce reductions due to technological integration,” the report stated. “The report underscores the need for global collaboration in reskilling efforts, promoting diversity and inclusion, and ensuring equitable access to emerging opportunities as technology reshapes the future of work.”
Digital transformation
As technology plays a decisive role in production, business and service delivery, Nepal has no alternative but to build capacity to adopt it. Undoubtedly, technology will become even more sophisticated in the coming days. Tech enthusiasts believe the future will be driven by AI. Some Nepali tech companies have already transitioned to focus on AI, such as Fusemachines, which is working on AI products, AI solutions and democratising AI.
Fusemachines started as a small startup but has now grown into a global leader in AI solutions, providing cutting-edge technology to businesses worldwide. “We believe in the power of education and technology to transform lives. By providing AI education and resources, we have been able to build a diverse and skilled team that drives our innovation and growth,” mentioned Sameer Maskey, Founder and CEO of Fusemachines Inc.
In the future, AI should be viewed as a tool to augment human capabilities. AI can automate repetitive tasks, allowing employees to focus on more strategic and creative endeavours. AI integration will reduce human effort and enhance productivity.
The presence of AI will certainly enhance human potential, as individuals will have more time to work and think creatively by automating mundane tasks. According to Maskey, “AI frees up time for employees to engage in more meaningful and innovative work. This shift not only boosts productivity but also leads to the creation of new job opportunities in AI development, management and support.”
In the journey of digital transformation, the government must ensure that no one is left behind. It is the state’s role to minimise the gap in technology adoption, not only to make people’s lives easier but also to address data security and prevent them from being deceived by frauds/scams. Karvika Thapa, Founder of Kimbu Tech, opines that the divide can be lessened through service accessibility, awareness and training on the merits and demerits, and safeguards, with priorities for increasing the participation of women and disadvantaged groups in society, both from the state level and from the operators of digital solutions.
Simultaneously, the government should focus on the investment ecosystem, providing an enabling environment for businesses to grow, and digitalisation and governance reforms to expedite the pace of digital transformation in the country.
