The human capital crisis has been exacerbated by a chain of challenges, including the exodus of youths from the country, far too inadequate private sector and government funding for L&D, and a lack of collaboration between colleges and the corporate sector to produce job-ready graduates.
With a population of just under 30 million, Nepal has around 4-5 million people living abroad, primarily as students and migrant workers. This number alone indicates the severity of the human resource crisis in the country. Human resources management has been a significant challenge in Nepal, and it is worsening with each passing day. Unfortunately, the outlook is bleak as more people seek to exit from the country in search of better lives and employment opportunities.
Despite abundant human capital, two major issues- the lack of investment in learning and development (L&D) and a massive brain drain- are hurting Nepal.
The country has failed to bring human capital back home. Additionally, the lack of L&D has further compounded the problem by failing to create skilled professionals within Nepal.
In this special article prepared for the 15th edition of the HR Meet, the HRM team has attempted to explore the root causes of Nepal’s human resource problems and examines potential solutions to address this critical issue.
The Great Nepali Brain Drain
Amidst the years of political uncertainty, Nepalis have become increasingly pessimistic. Particularly, the younger generation has developed a deep sense of apathy toward their home country which is one of the key reasons for the surge in migration. The top priority of many young Nepalis today is to move abroad and settle in foreign lands.
It is estimated that as many as four million Nepalis are abroad as students and migrant workers.
Lately, many countries have opened their doors to skilled workers from Nepal. As the trend is increasing, it has raised an important question: how long can Nepal survive by sending its precious human capital abroad? The growing trend of Nepali students pursuing higher education abroad has only exacerbated the situation.
With the Covid-19 pandemic waning, there has been a significant increase in the number of Nepali students applying for a no-objection certificate (NOC) from the Ministry of Education. Unfortunately, the vast majority of these youths will likely not return to Nepal after completing their university education.
While Nepalis working abroad contribute significantly to Nepal’s economy through remittances, this comes at a high cost. Nepal is losing the skilled workforce necessary for its development, and many sectors such as health, engineering, information technology, and hospitality are already under significant pressure as employers struggle to find qualified professionals.
Furthermore, Nepal’s political instability, deep-rooted corruption, and bureaucratic hurdles have made it difficult for those aspiring to become entrepreneurs to thrive. This has resulted in a high unemployment rate and a lack of job opportunities for young people who make up a significant portion of Nepal’s population.
A few editions earlier, the HRM published a cover story on the brain drain situation in Nepal, where we explored the mass exodus of professionals from Nepal. The numbers point to a worrying situation in the domestic job market.
According to the Nepal Medical Association (NMA), as many as 30,000 doctors, including dentists, are registered with the Nepal Medical Council. Of them, only 18,000 doctors are currently working in Nepal.
The same is the case for nurses. Nepal currently has 72,550 registered nurses, of which, 25,000 are working in foreign lands.
In the Engineering sector, the situation is even worse. At least 71,000 engineers are registered with Nepal Engineering Council, and experts in the sector say more than 55 percent of Nepali engineers have migrated abroad for better opportunities.
The domestic IT industry is one of the sectors hardest hit by the flight of human capital from the country. Nepal produces an estimated 16,000 IT graduates every year. Of them, more than 6,000 go overseas for further opportunities, say IT stakeholders.
The hospitality sector has also been hit hard by human capital flight. It is estimated that some 2,500 graduates are produced by hotel management colleges in Nepal annually. Similarly, hotel management training institutes also produce around 6,000 trained personnel every year. However, over 70 percent of the human resources leave the country yearly to work abroad creating a huge shortage of workforce.
A worsening situation
The situation of brain drain in Nepal is deteriorating as organizations in all sectors are experiencing increasing difficulty to recruit skilled and capable individuals. In addition, the lack of skilled manpower in Nepal is exacerbating the brain drain issue, as many of those who possess the necessary skills are opting to migrate to other countries. And, even those who do work within the country often leave after a brief period of employment, further compounding the problem.
Talking to the HRM, entrepreneurs, HR professionals and academicians say that the majority of skilled and semi-skilled youths are flying abroad for better opportunities creating a short supply of workforce in the job market and it has equally become difficult for organizations to retain their employees. “Graduates often have a mindset of seeking job opportunities abroad after gaining some work experience, leading to brain drain. Additionally, some employees leave for better opportunities after receiving training, which can be discouraging for employers,” said Prashant Ghimire, Co-founder and Managing Director of Hilife Foods.
According to former banker Parshuram Kunwar Chhetri, the political scenario has made the situation such that graduates do not want to stay and work in Nepal. “Many youths, even before their graduation, plan to go abroad and find better opportunities. The situation, I see, is not improving unless the government comes up with youth-friendly policies,” he said.
According to Deepak Raj Joshi, Director General of Confederation of Nepalese Industries (CNI), the issue of brain drain in Nepal is a complex problem that requires a multifaceted approach. “The political instability in the country has played a significant role in driving talented individuals to seek opportunities abroad,” he opined.
The data shows that the number of youths leaving abroad is increasing every year, and according to the government, more than 3,000 youths are flying abroad every day either on student or work visas. The data provided by the Ministry of Education, Science, and Technology shows that the government issued 112,528 no-objection certificates (NOC) to those leaving the country for higher studies in the last fiscal year. In the 11 months of 2022, the number stood at 102,873. According to experts, poor quality of education, unstable government, delayed academic calendar and lack of jobs after graduation are the major reasons behind the exodus of youths.
The Tribhuvan University, the largest and the oldest university in Nepal, took more than a year to publish the results of examinations of the bachelor’s and master’s level programs. Although foreign universities opted for online examinations, Tribhuvan University waited for Covid-19 to subside to conduct examinations. It disrupted the whole academic calendar of the university, leaving students frustrated and waiting for the whole academic year to get their results.
According to Krishna Prasad Bhusal, Director at Department of Foreign Employment, the number of people going abroad is increasing as there is a lack of employment in the country.
“The demand for Nepali workers from abroad has started to increase. Around 3,000 youths are receiving approvals to fly abroad every day. The demand for Nepali youths in the manufacturing sector in labor destination countries has gone up significantly after the Covid-19 pandemic,” said Bhusal.
The situation has become even worse as meritocracy is dying in Nepal. Political interference in appointments has become increasingly evident, and nepotism has resulted in those with political connections being appointed to positions, leaving the truly talented and deserving individuals frustrated and without opportunities. This has resulted in frustration among those who are talented but lack political connections. It has also directly hampered innovation and productivity. The youths who have worked hard to achieve academic and professional success are being overlooked due to their lack of political connections, while others are being unfairly favored. This imbalance threatens to undermine the country’s progress and potential, as the best and brightest are left behind.
Another reason to worry about Nepal is that the country’s population is getting older with each passing year. The Himalayan nation, which until now is said to have a big demographic dividend due to the high number of youths is slowly becoming a country of older people. The preliminary report of the National Population Census 2021 has shown some shocking facts. As per the statistics, Nepal’s population grew by an average of 0.93 percent, the slowest growth in 80 years. It is primarily because a large number of women and men of the reproductive age group are residing abroad and many younger people in the country are following suit. These statistics show that Nepal will not be a young country in the next two and a half decades.
Once these young people grow old after two-three decades, a huge resource will be spent on healthcare and allowances. Those who migrated to the labor destinations in the Gulf region and Malaysia for better opportunities, want their children to settle in western countries. Experts fear that Nepal will just become home to senior citizens in the near future.
Learning & Development in Nepal
Another major contributor to Nepal’s human resource problem is the lack of investment in learning & development (L&D). As the private sector is not investing enough in training and development programs, employees do not acquire the necessary skills and knowledge to advance in their careers, leaving many feeling stuck and unmotivated.
By fostering collaboration between the private sector, universities, and business schools, there is potential to invest in learning and development programs that can prepare and equip the youths with the necessary skills to meet the demands of today’s competitive market.
Unfortunately, the current reality is that the private sector is opting to hire skilled individuals from the market instead of investing in their own learning and development initiatives.
In 2017, the central bank made it mandatory for the bank and financial institutions (BFIs) to spend at least three percent of their total staff expenses on their training and capacity development. However, many HR professionals and academicians, talking to the HRM, claimed that the amount is spent on foreign visits of senior officials in the name of training.
Apart from banks, the corporate sector does not seem to be serious about investing in L&D and there are multiple factors behind it, and the lack of business growth is the major hindrance, say observers.
Lack of business growth squeezes investment
According to Ghimire, the lack of business certainty in Nepal has made it challenging for companies to invest in learning and development. “When there is no business growth, companies become reluctant to invest. Businesses in Nepal have been facing challenging times lately, be it the 2015 earthquake, Covid-19, or the current economic slowdown,” he said.
Ajay Shrestha, Chief Managing Director of iCapital gave an example of his own business. Shrestha, who also runs a coffee business in Nepal, says he has been competing with the global coffee chain Starbucks. He explained how.
“My business cannot match the compensation packages offered by Starbucks due to our limited business volume. After working for some time, our employees go abroad and I can not stop them by offering them the same package offered by Starbucks. The business volume here and abroad is not the same,” said Shrestha, adding, “The private sector is currently shrinking, leading to decreased investment in employee learning and development.” According to him, this trend will only change if businesses grow and can afford to invest more. “Nepal’s economy is heavily import-dependent, and has more and more traders, but lacks entrepreneurs. This scenario poses a significant challenge to graduates seeking intellectual growth as they tend to become more trade-oriented,” he opined.
According to Jyoti Regmi Adhikary, Head of Department – Human Resource and General Management at Kathmandu University School of Management (KUSOM), the number of management colleges is growing significantly in Nepal, but the businesses are not. “When there are a limited number of businesses compared to business schools, problems arise,” she said, pointing out the lack of concrete plans of the corporate sector to face crises. “In the past decade, the corporate sector in Nepal faced a number of crises such as the earthquake and border blockade in 2015, The Covid-19 pandemic and the economic downturn which significantly affect their ability to invest in L&D. They need to have a concrete plan to tackle each crisis and prepare for future. Only then they will be able to invest more in L&D.”
The size of the business and the size of the market has made it difficult for the IT sector to foster, say stakeholders. It is an undeniable fact that there is a significant shortage of human resources in the IT sector in Nepal, as many young professionals tend to migrate abroad after working for a brief period of time. The primary reason for this is the inability of domestic companies to compete with foreign ones in terms of compensation and business volume. If a Nepali company is offering a salary of Rs 100,000 to an employee, it is not surprising that they would be tempted to migrate if offered double that amount elsewhere. According to HR managers of IT companies, this issue has only been compounded by the Covid-19 pandemic, which has led to the concept of remote work, allowing foreign companies to hire Nepali professionals as remote workers at rates that are way more than what local companies offer.
Duality of Private Sector
The private sector in Nepal holds a dual character. In prosperous times, it takes all the profits without sharing the benefits with its employees. However, during challenging times, the burden of losses is placed solely on the shoulders of the workforce.
The Covid-19 pandemic was a perfect example of this, with many private sector organizations slashing salaries and axing jobs without due compensation to the affected employees. Unfortunately, many such acts were carried out without regard for the law, and the private sector’s immense power in Nepal meant that their actions went unchallenged.
During the pandemic, many enterprises received refinancing loans to support their business and pay employees’ salaries. However, instead of using the funds appropriately, they invested in unproductive sectors such as real estate and the stock market. This was a wasteful use of funds that should have been allocated toward staff remunerations and business operations. Unfortunately, such misuses went unchecked by the central bank.
One specific example of this was seen in the hotel industry, which reduced over 70 percent of its workforce during the pandemic. Sadly, 80 percent of those workers are now abroad.
Despite the private sector claiming to need a skilled workforce in Nepal, their actions toward human resources management demonstrate a lack of regard for employees.
In the absence of job security, youths do not feel safe in their career prospects and often seek opportunities elsewhere. The private sector’s inconsistent approach to employee welfare only exacerbates this problem, resulting in a talent drain that negatively impacts the country’s economic growth and development. To retain the country’s youth and encourage them to contribute to Nepal’s growth, the private sector must prioritize employee welfare and job security.
Why are Graduates Not Job-ready?
The debate regarding Nepali universities not producing job-ready graduates has been going on for a long. Some argue that business schools are not getting enough support from the private sector to provide job opportunities for students before they graduate. Likewise, the private sector says that they have to invest time and resources in training graduates from scratch to make them ready for employment.
Both sides, according to experts, have valid points.
Business schools should aim to collaborate more with the private sector to develop curricula that are relevant and aligned with industry needs. Likewise, the private sector must provide more support and resources to facilitate this process, they say.
“Currently, universities are producing graduates, but industries are struggling to find the desired human resources, leading to a significant gap. To bridge this gap, I propose compulsory internship programs during the course, whether it is a bachelor’s or master’s degree. However, the internship models must change, and industries should not hire undergraduates solely for the sake of giving them a job. Instead, companies should use the internship programs to shape and train students to meet their needs before they graduate,” said Subash Subedi, team lead of Nepal Vocational Qualification System (NVQS) Project.
“At present, graduates face challenges transitioning to the workforce, as they lack practical knowledge and experience. By connecting the university and industry through work-based courses and curricula, we can create a win-win situation for graduates and industries. While universities cannot keep up with the fast-changing industries, collaboration with colleges can provide students with a better chance to experience the real world.”
Experts also say the business sector should provide meaningful internship programs to make graduates job-ready.
“The corporate sector often complains of a talent shortage in the market and blames business schools for not making graduates job-ready. However, when business schools approach the corporate sector for meaningful projects for undergraduates, there is not much positive response,” said Ashish Tiwari, Principal and Director at Ace Institute of Management.
“Without a culture of providing meaningful projects, it is unrealistic to expect graduates to be job-ready immediately after graduation. While some corporate sectors provide internships, they often view interns as free resources. Corporate sectors should assign meaningful projects to undergraduates to identify talent before graduation, train them, and plan for their future expertise,” he added.
According to CNI Director General Joshi, the only way to address this problem is through collaboration between the private sector and universities. “The universities must produce graduates who possess the practical skills needed to succeed in the industry. This requires a shift in the focus of education from a textbook-based approach to practical-based knowledge. Universities should work closely with the private sector to understand their needs and design curriculums that cater to those needs,” he said.
Though many corporate organizations have shown a willingness to train undergraduates, there are many instances where students do not show any interest to work as they are mentally prepared to leave the country.
“Colleges should approach companies for tie-ups, but unfortunately, this is not always the case. When we approached a few government colleges to recruit undergraduates, we were surprised to find that many students were not interested in joining before graduating. This is happening because youths are mentally prepared to leave Nepal,” said Ghimire.
The collaboration between colleges and the private sector has been a topic of discussion for quite some time now. While it is true that some colleges have managed to establish partnerships with the private sector to bring in visiting professors, experts argue that this is not enough.
However, despite the challenges, there are some collaborations taking place between colleges and the private sector. For instance, some colleges are organizing job fairs in partnership with the private sector to connect students with potential employers. This allows students to get an understanding of the skills and experience required by the industry and helps them gain insights into the kind of work environment they can expect in the future.
Additionally, some colleges are bringing in visiting faculty from the private sector to give lectures and hold workshops. The visiting faculty members can share their expertise and insights with students and provide them with a better understanding of how their academic knowledge can be applied in practical settings.
“Outdated university curricula and a lack of industry professionals invited as guest lecturers limit undergraduate students’ exposure to the corporate world. Although I graduated as a topper, I believe that I gained 90 percent of my expertise and knowledge after joining the workforce,” said Shrestha, adding that business schools are not bringing enough visiting lectures for MBA programs.
According to Tiwari, at ACE, the placement rate is 100 percent, but he thinks the industries should hire students earlier to identify young talents.
In other countries, the management of industries or corporate sectors seeks help from universities to solve problems through research. “However, this is not the case in Nepal, and we have failed to recognize the importance of research and universities. There needs to be a mediator that can connect the gap between colleges and the private sector,” said Adhikari. “Although some HR companies such as GrowthSellers are already doing this, much more collaborative effort is needed.”
Adhikari also shared that KUSOM organizes a job fair every year, and this year at least 50 companies participated in the fair and selected undergraduate students. “At KUSOM, we prioritize a practical approach to learning instead of just focusing on theories. We understand the importance of real-life scenarios, which is why we invite visiting faculties who are practitioners in their respective fields.”
Solutions to Nepal’s Human Resources Problem
To address the human resource problem in Nepal, the government and private sector must work together to create a more favorable environment for businesses and professionals. This can be achieved by investing in education, training, and research and development.
First, the government must prioritize education and invest in the country’s education system. This includes funding for infrastructure, textbooks, qualified teachers, and a modern curriculum. The government must also create a more conducive environment for businesses to thrive by reducing corruption, simplifying bureaucratic processes, and providing tax incentives to businesses that invest in learning and development, and employee training, experts say.
Second, the private sector must play its part in investing in employee learning and development. Companies must prioritize employee training and development programs to ensure that their employees are acquiring the necessary skills to advance in their careers.
Third, the government and private sector must work together to attract and retain skilled professionals in Nepal. This can be achieved by offering competitive salaries, benefits, and opportunities for career advancement.
Fourth, meritocracy must be promoted. According to Joshi, the country is situated between two massive economies, India and China, and has immense potential for growth. “The government, private sector, and universities should work together to create an environment that nurtures entrepreneurship and innovation. This will provide young people with the resources and support they need to start their own businesses and create jobs,” he said, adding, “It is important to note that we cannot completely stop the brain drain, as individuals have the right to choose where they want to work and live.”
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