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Sat, April 20, 2024

Ignored potential unleashing the IT sector for Nepal’s economic prosperity

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In a recent meeting of the House of Representatives, Dr Swarnim Wagle, a parliamentarian, economist and the former Vice Chairman of the National Planning Commission, expressed his concerns about the government’s neglect of the IT sector’s immense potential in the current budget. During a meeting of the HoR, Wagle emphasised the transformative power of the IT industry, its capacity to contribute significantly to Nepal’s prosperity, and highlighted the need for government attention.

The IT industry has the capacity to revolutionise the country’s economic landscape and drive substantial progress through innovation and digital transformation, experts believe. By embracing digital technology, Nepal can position itself as a regional hub for innovation and technological advancement, driving economic growth and prosperity.

Wagle referred to a survey conducted by the Institute for Integrated Development Studies (IIDS), a South Asian policy think tank, during his tenure as its chairperson. He said that the preliminary findings of IIDS indicate that the IT sector could significantly impact Nepal’s economy. He criticised the current budget for overlooking the immense potential of the sector, stating that it has failed to address the transformative power and unlimited possibilities that the IT sector holds.

Data obtained from the IIDS survey, as per Wagle, reveals that there are 7,637 registered IT companies with approximately 7,000 contributing to tax revenue. Further, Nepal has 106 export-oriented IT businesses, along with a significant number of freelancers, accounting for 66,509 individuals. These freelancers earn an annual average income of $4,723. The per capita income of Ukraine, which is currently at war, is $5,000. The middle-level people earn around $6,395 and senior level people earn around $15,322 while working in Nepal. The per capita income of those earning from the IT sector at the senior level is substantially higher than the per capita income of Russia, China and Malaysia. Further, the collective earnings of IT workers in Nepal exceed $515 million annually.

Wagle points out that improving laws and regulations is vital for the IT sector’s development. The government needs to establish comprehensive policies that create a favourable business environment, promote entrepreneurship, and attract investment. Additionally, investment in digital infrastructure such as broadband connectivity and data centres is essential.

Ajit Shah, CEO of Lotus Holdings responded to Wagle’s statement by acknowledging the government’s recent policy reforms aimed at developing the startup ecosystem and supporting venture capital and startup businesses. He highlighted the announcements made by the government while unveiling the budget for fiscal year 2023-24 including the allocation of Rs 1.25 billion for the development of the startup ecosystem. Shah also emphasised the significance of the provision allowing companies to be established with a capital of just Rs 100 and the ability to open branch offices in foreign countries for marketing and promotion purposes. Shah agreed with Wagle’s perspective in terms of potential and also mentioned his involvement in the survey conducted by IIDS. However, Shah emphasised the need for collaborative efforts to find solutions rather than engaging in criticism.

Atulya Pandey, Co-CEO of Outside, stressed the need for the government to implement plans and policies that strengthen institutions supporting the sector. He emphasised the importance of friendly policies for IT companies which would encourage their dedication to the country’s economic development. Pandey also highlighted the significance of skilled manpower in the IT sector, suggesting that the government should introduce policies to attract and retain such talent. He further emphasised the role of educational institutions, stating that they should adopt a practical-based approach to education rather than relying solely on theoretical knowledge.

By embracing digital technologies and establishing a thriving IT ecosystem, Nepal can position itself as a regional hub for technological advancement, attracting global businesses and stimulating job creation. Digital transformation can enhance operational efficiency, enable e-commerce, and improve connectivity both domestically and internationally. Small and medium-sized enterprises (SMEs) can leverage technology to expand their reach, streamline processes, and access global markets, fostering economic growth and job creation.

But several challenges have hindered the growth of Nepal’s IT sector. Insufficient government attention, lack of supportive policies, and inadequate infrastructure are among the primary obstacles. Additionally, limited access to financing, a scarcity of skilled professionals, and the brain drain phenomenon pose significant hurdles.

To unlock the full potential of the IT sector, the government must prioritise its development. Firstly, comprehensive policies and regulations should be established to create a favourable business environment and attract investment. This includes incentivising entrepreneurship, offering tax breaks, and facilitating access to capital for startups. Strengthening intellectual property rights protection is also crucial to encourage innovation. Moreover, investments in digital infrastructure, such as broadband connectivity and data centres, are essential to ensure a robust IT ecosystem. The government should collaborate with educational institutions to enhance the quality of IT education and skill development programmes, nurturing a competent workforce to meet industry demands.

Government agencies need to proactively engage with industry experts and stakeholders to develop a holistic strategy for the IT sector’s growth. Regularly conducting surveys and research, as done by the IIDS, can provide valuable insights into the industry’s potential, enabling evidence-based decision-making and policy formulation.

The IT sector has the power to reshape Nepal’s economic landscape by leveraging its transformative potential but do Nepal’s policy makers hold the will to make it happen?

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