While Nepali talent is undoubtedly abundant, motivating and providing a conducive environment for Nepali youths is vital.
The IT industry in Nepal is on the rise, with promising growth opportunities, but it still faces several challenges. One significant avenue for revenue generation is through exports of services, which clearly indicates that the sector has tremendous potential. In our research, we conducted a survey involving 106 companies, and it’s worth acknowledging that some respondents pointed out underreporting, which is a valid concern and an area for considering more numbers of companies that are not registered under the tax system.
The government has also recognized the importance of the IT sector and has recently taken positive steps to support its development. Additionally, the announcements in the federal budget and monetary policy are having a favorable impact on the industry. Despite the presence of several prominent IT companies in Nepal, the country has yet to attract significant foreign investment. This remains a pressing issue. Furthermore, there are challenges related to freelancers in the IT sector that need to be addressed.
Many companies in Nepal are grappling with a common challenge in the IT industry, which is the retention of mid-level IT professionals. Typically, these companies hire entry-level staff and invest in training them, only to see these trained professionals leave for better opportunities abroad. This phenomenon has led some companies to feel that they are functioning more like training institutes than thriving businesses. Once these professionals receive training and experience, they often opt for freelancing for foreign companies while remaining in Nepal. This trend is a key factor contributing to the high number of freelancers in the country. It underscores the need for companies in Nepal to implement strategies to retain their skilled IT workforce and create an environment that encourages professionals to build their careers locally rather than seeking opportunities overseas. Maybe bonds for a certain period of time would help.
Nepal’s IT sector is currently engaged in smaller-scale initiatives. Three key elements are crucial for its growth: investment, policy support, and a skilled workforce. IT infrastructure is often centered around Kathmandu, but even in the capital, internet quality remains a significant issue. In terms of investment, companies in the IT sector can be categorized into three groups: those requiring seed funding, mid-sized companies, and larger enterprises. The larger firms often serve as branch units or have foreign sales operations while maintaining their registration in Nepal for administrative purposes, contributing significantly to the economy. Mid-sized companies are looking to expand beyond Nepal due to the limited domestic market size. To facilitate their growth, merging these firms like those of banks could be an effective strategy. Interestingly, some mid-sized companies claim not to require additional funding, while others express the need for capital, although they may not meet the required compliance standards. This mismatch between IT companies’ financing needs and the banking industry’s offerings results in a disconnect. Banks report a lack of demand for loans from the IT sector, while IT companies argue that banks do not adequately support them, primarily due to issues related to collateral. The underlying issue here is the substantial gap between the financial needs of IT companies and the resources available through traditional banking channels.
In Nepal, there are approximately 9,000 registered companies, but due to the provision in the procurement act allowing one person to be part of three companies, this number can be reduced to around 3,000 companies. Among these 3,000 companies, there are roughly 1,500 to 1,700 that can be found in digital space. Surprisingly, out of these, only around 700 companies have physical office spaces. In our research, we have identified 106 companies within this subset that have the potential to make significant strides in IT export services. By focusing on nurturing and developing these 700 companies, Nepal can tap into its untapped potential. This approach is essential, as neighboring countries like Bangladesh and India have advanced significantly ahead of Nepal in the IT sector. To improve Nepal’s image and competitiveness, it’s crucial to support and promote the growth of these promising IT companies.
The development of a skilled workforce is a critical aspect of Nepal’s growth in the IT sector. Currently, there’s a significant disconnect between what is taught and what is expected from graduates, with an 85 percent gap identified in recent research. To bridge this gap and improve the quality of education and training, it’s essential to revamp the curriculum. This can be achieved by establishing a consortium of universities that collaborate to design and deliver up-to-date and industry-relevant courses.
Also, investing in infrastructure, including dedicated skilled academies, is crucial for providing the necessary training facilities. Taking inspiration from companies like Infosys, which initially focused on sending human resources abroad and now boasts a significant presence in global tech giants like Google and Meta, Nepal should prioritize the development of a skilled workforce. These efforts will yield substantial rewards for the country over time. Also, addressing the shortcomings in technical and vocational education is imperative. Despite previous investments, this sector has not reached its full potential. Strengthening technical vocational education is essential to provide students with practical skills that align with industry needs and ensure a more robust and competent workforce in Nepal’s IT sector.
Expanding the quota of seats for IT colleges is a positive step towards meeting the growing demand for IT education. However, it’s crucial to maintain proper monitoring and quality control mechanisms to ensure that the education provided is of high quality and aligned with industry standards. This will help produce competent graduates who can contribute effectively to Nepal’s IT sector. The presence of foreign universities and affiliated colleges in Nepal is huge.
Ensuring the quality of education in these institutions is essential to prevent a substantial amount of money from flowing abroad for education. This can be achieved by establishing and enforcing rigorous quality assurance standards and accreditation processes. While Nepali talent is undoubtedly abundant, motivating and providing a conducive environment for Nepali youths is vital. Addressing issues like complacency or laziness among youth can be tackled through a combination of effective mentoring, career guidance, and creating an environment that encourages innovation and hard work. This way, Nepal can harness its talented workforce and channel their potential into driving the growth of its IT sector.
Addressing the brain drain in Nepal indeed requires improving the economic prospects within the country. Ensuring better paychecks, career opportunities, and overall working conditions are essential factors in retaining talent and discouraging Nepali youths from seeking opportunities abroad. The IT industry, being unique in its nature, should be recognized and accommodated in labor policies. This recognition is necessary to create an environment where IT professionals are valued, and their work is acknowledged.
Additionally, adapting labor laws to encompass freelance work and recognizing it as a legitimate form of employment is crucial. Many countries have successfully adapted their labor laws to accommodate the changing nature of work, and Nepal can draw lessons from their experiences to create a more supportive regulatory framework for the IT sector. By aligning labor policies with the needs of the IT industry and incorporating successful practices from other countries, Nepal can create a more conducive environment for IT professionals and curb the brain drain by providing competitive opportunities at home.
The foreign ministry is holding a meeting to be chaired by the Prime Minister and it will be attended by ambassadors to discuss the challenges and well-being of these overseas workers. While discussions about the well-being of overseas laborers are vital, these forums can also address the challenges and opportunities in Nepal’s IT sector to promote its growth and talent retention. Both aspects deserve attention for comprehensive economic development.
The IT industry in Nepal presents lucrative opportunities. Take, for instance, a young entrepreneur who invested 1.6 million in an IT company. Today, he employs a workforce of 70. This success story underscores the sector’s potential. However, there’s a need to shift the mindset of Nepal’s youth. Currently, many prioritize studying over working or vice versa. Bridging this gap by encouraging a harmonious blend of both is essential for future growth.
In Nepal, the government is the largest employer, but at times, its criteria for projects are unattainable for local companies. As a result, foreign companies are often brought in, leading to capital outflows and a mismatch in economic benefits. The government has also invested significantly in digitization, and nurturing Nepali companies in this sector could help retain capital within the country. Attracting major foreign companies to Nepal is challenging, partly due to political factors. The perception of risk is high because business operations are influenced by political changes. This situation contrasts with foreign countries where such instability is less common.
Nepal’s diaspora is substantial, and many Nepali individuals have achieved significant success abroad, particularly in tech companies, holding influential positions. Leveraging this diaspora can be a valuable strategy. These successful Nepali professionals can serve as effective ambassadors for Nepal and help promote the country’s interests. Establishing networks and partnerships with the Nepali diaspora can unlock numerous opportunities for collaboration, investment, and knowledge exchange, benefiting both Nepal and its diaspora members. It’s essential to tap into this valuable resource to strengthen ties with the global community and drive economic and technological growth in Nepal.
Sharma is a Consultant at the Institute for Integrated Development Studies (IIDS)
