Inside Nepal’s Quiet Software Export Boom, and What It Needs to Go Global

Cost matters, but it is not decisive. Nepal’s competitive advantage lies in adaptability, strong English proficiency, growing exposure to global tools and a workforce motivated by limited domestic opportunities.
“There’s a parallel economy here,” says Raut. “Thousands of professionals earn in dollars and euros while living in Nepal. It barely shows up in official numbers.”

For years, Nepal underestimated one of its fastest-growing export sectors. While public attention remained fixed on traditional handicrafts and low-margin merchandise, a far more scalable industry was quietly earning foreign currency: software and IT services.

By the time the government formally recognised information technology as a priority export in the Nepal Trade Integration Strategy (NTIS) 2023, the sector was already well underway. A landmark study by the Institute for Integrated Development Studies (IIDS) revealed that in 2022 alone, Nepal exported $515.4 million worth of IT products and services, without meaningful incentives, branding support or tailored policy frameworks.

The revelation caught policymakers off guard. IT exports had quietly outperformed most traditional goods, contributing roughly 1.4% of GDP and accounting for 5.5% of foreign exchange reserves. More importantly, they signalled a structural shift: Nepal had found a globally competitive export that was digital, scalable and largely immune to geography.

A Landlocked Country Finds a Sea-Locked Economy

Unlike traditional exports dependent on imported raw materials and thin margins, software services are almost entirely intellectual property produced in Nepal. Nearly every export dollar stays in the domestic economy. By 2022, the sector’s value was nearly three times that of refined soybean oil, then Nepal’s top merchandise export, and far exceeded earnings from carpets and textiles.

This discovery reshaped government ambition. In the 2024/25 budget, Nepal declared a “Decade of Information Technology,” targeting Rs 3 trillion ($22.5 billion) in IT exports over ten years and pledging to create 500,000 direct jobs, a strategic attempt to convert chronic brain drain into digital retention.

“It’s quiet because most of it happens outside formal channels,” says Saroj Raut, CTO of Trackon Nepal. “People are building skills, reputations and global client bases without publicity. The real export figure is likely far higher than what shows up in official data.”

Industry estimates suggest momentum is accelerating. By 2023/24, software exports were already approaching $1 billion, supported by a workforce exceeding 80,000 professionals working remotely, freelancing or through export-oriented firms.

The Invisible Economy Problem

Despite its scale, much of Nepal’s software economy remains statistically invisible. Freelancers and small firms often receive foreign payments as remittances to avoid complex regulatory and tax compliance, masking the sector’s true size.

“The income is legal, but it’s misclassified,” says Gaurav Pandey, President of NAS-IT. “Without accurate data, policy design becomes guesswork.”

Formalising payment channels and improving export reporting are now priorities. While the government’s long-term ambition is $22 billion in exports, industry leaders consider $5–6 billion by 2034 a realistic intermediate milestone. By some estimates, Nepal has already crossed the $1 billion mark in 2025.

What Nepal Really Exports

Contrary to assumptions, Nepal’s software exports are not limited to low-value outsourcing. While entry-level services exist, many firms deliver complex, high-value work: full-stack development, cloud architecture, data analytics, cybersecurity, AI services and long-term product maintenance.

Nepali teams increasingly operate as embedded extensions of global companies rather than transactional vendors.

“The challenge isn’t capability, it’s branding and trust,” Pandey explains. “Global clients trust known brands. Nepali firms often build the product, but someone else sells it.”

Companies such as Leapfrog Technology, TechKraft, CloudFactory and Logpoint Nepal illustrate this evolution. Nepal is exporting not just labour, but reliability, systems thinking and long-term collaboration.

Why Nepal Is Competitive

Cost matters, but it is not decisive. Nepal’s competitive advantage lies in adaptability, strong English proficiency, growing exposure to global tools and a workforce motivated by limited domestic opportunities.

“There’s a parallel economy here,” says Raut. “Thousands of professionals earn in dollars and euros while living in Nepal. It barely shows up in official numbers.”

Remote work, global freelancing platforms and self-directed learning have enabled Nepal to integrate into the global digital economy without large-scale state intervention, a rare phenomenon among developing countries.

Policy Is Catching Up, Slowly

Recognition has improved, but regulation still lags. Firms face uncertainty around taxation, export branding, foreign currency access and overseas investment.“F1Soft builds international-grade software, but regulatory barriers force it to sell through third parties who rebrand and export it,” Pandey says. “That value should come directly to Nepal.”

As with startups a decade earlier, the pattern is familiar: the private sector innovates first; policy follows later.“The billion-dollar milestone was achieved despite policy constraints,” Pandey adds. “With the right framework, the sector could scale much faster.”

Services Today, Products Tomorrow

Most exports remain service-based. While services generate steady income, products create scale, intellectual property and global brand equity. 

Transitioning to product-led growth will require patient capital, legal clarity and international market access, conditions still evolving in Nepal.

Whether Nepal can make that leap will define the next phase of its software economy.

Highlights
Policy Recommendations: How Nepal Can Scale Its Software Exports

-    Formalise Without Penalising

Create simplified compliance and tax frameworks for freelancers and SMEs to encourage formal reporting without discouraging participation.

-    Enable Direct Export Branding

Allow IT firms to sell and brand products internationally without routing through third parties.

-    Improve Export Data Systems

Modernise banking and reporting mechanisms to distinguish software exports from remittances.

-    Invest in Product EcosystemsSupport venture funding, IP protection and global go-to-market programmes for product-led startups.

-    Align Education With Industry

Strengthen practical, project-based learning and industry collaboration to sustain talent pipelines.

-    Treat Software as Strategic Infrastructure Recognise IT exports as a long-term economic pillar, on par with hydropower and tourism.