The year 2023 is expected to witness global spending of around 4.7 trillion US dollars in the Information Technology (IT) sector, with projections from Gartner, a reputable American technical research and consulting firm, suggesting that this figure could surpass five trillion US dollars by 2024.
Asia commands a significant share in the export of IT-related goods, products, and services. Countries such as China, Taiwan, Japan, South Korea, and India have demonstrated their industrial prowess in producing IT-related products. Additionally, other nations are progressively capitalizing on the export of IT products and services.
Asian IT Export Landscape: A Positive Trend
Asia is playing a pivotal role in the IT export market. Established industrial capacities in countries like China, Taiwan, Japan, South Korea, and India, coupled with emerging players, are reshaping the global IT export market.
Nepal’s IT Industry: Current Scenario and Future Outlook
The IT sector in Nepal is experiencing an impressive surge. Recent findings from the Institute of Integrated Development Studies (IIDS), a respected research and policy advocacy institution in Kathmandu, highlight Nepal’s potential in exporting IT services. In 2022, Nepal recorded IT service exports worth 67.93 billion Nepalese rupees, marking a substantial increase from 24.44 million US dollars in 2021, indicating a remarkable growth rate of 64.2%. Sustaining a growth rate of at least 50% over the next years could propel Nepal’s IT service exports to reach one billion US dollars by 2024.
India’s successful journey serves as an encouraging example, with IT service exports amounting to 194 billion US dollars in 2022. Likewise, Pakistan, Sri Lanka, and Bangladesh have entered the market with significant IT services exports.
Both independent freelancers and companies in Nepal are driving the positive momentum in IT service exports. Investments totaling 40.12 million US dollars were funneled into Nepal’s IT companies in 2022, yielding revenues surpassing 510 million US dollars. The export of IT services contributed 1.4% to Nepal’s GDP and boosted foreign exchange reserves by 5.5%.
Diverse Array of Exported IT Services
Nepalese freelancers are carving a niche across various IT service domains, encompassing clerical and data entry, creative multimedia work, professional services, sales and marketing support, software development, writing, and translation. Priority areas for freelancers span coding, programming, design, software development, social media management, video editing, surveys, gaming, content development, animation, search engine optimization, testing, product categorization, edtech, labeling, and transcription.
UI and UX design lead the pack as priorities for companies seeking Nepali freelancers. Proficiency in SQL, Full Stack Web Development, Python, DevOps, Automation Testing, Cloud Computing, Data Science, AI, SEO, Cybersecurity, Java Certification, System and Networking, Dot Net Programming, and Blockchain Development is highly sought after.
Challenges and Avenues for Enhancement
While Nepal’s IT export sector is rife with potential, it confronts several challenges. Differences in time zones, job instability, work-life balance struggles, communication hurdles, payment-related issues, and extended working hours constitute key challenges.
The sector’s progress is hampered by infrastructure gaps, notably unreliable electricity supply, and subpar internet services. A local data center is a pressing need, as external data facilities are often relied upon, and establishing offices in Nepal can be cost-intensive.
Policy and regulatory bottlenecks also inhibit sector growth. Companies and freelancers call for improved policies covering intellectual property protection, data privacy, and cross-border data flow.
Government Initiatives and Stakeholder Insights
Acknowledging the government’s support for the IT sector, including tax exemptions and policy facilitation for larger companies, is crucial. However, entrepreneurs stress the necessity of a more comprehensive approach to accommodate smaller IT businesses. They emphasize the importance of well-defined policies and supportive regulations to foster sector growth.
Payment processes present challenges related to payment delays, high fees, and client communication hiccups. Recommendations include aligning local banking practices with global trends and ensuring that freelancers are brought under the taxation scope, while receiving government-backed benefits and support.
Path to Progress: Recommendations and Stakeholder Perspectives
Nepal’s IT sector offers promising avenues for growth, but challenges demand attention. Investments in infrastructure, research and development, startups, and skilled human resources, coupled with strategic branding, are vital.
Stakeholders stress the need for policy improvements encompassing tax matters, data privacy regulations, and cross-border data flow. By fostering an environment conducive to IT business expansion, Nepal can harness the immense potential of its IT sector.
Government Standpoint and Stakeholder Insights
Government officials, including Netra Prasad Subedi from the Ministry of Communication and Information Technology, underline the government’s dedication to supporting the IT sector. Policies promoting cybersecurity, data security, and tax exemptions for larger companies are already in place.
Technologist Rajib Subba appreciates the government’s efforts but notes that further work is warranted. Ensuring political stability, streamlining investment processes, and facilitating foreign fund repatriation are paramount. He proposes mechanisms to tax freelancers earning foreign currency, benefiting both professionals and the government.
Rajuprasad Pyakurel, director of the Internal Revenue Department, highlights the introduction of a 1% tax on service exports in foreign currency, simplifying matters for exporters. However, increased focus on tax exemptions from the government is pivotal to incentivize the export of IT services.
Conclusion: Navigating Growth Opportunities
Nepal’s IT sector stands on the cusp of robust growth within the global IT export landscape. While challenges persist, concerted efforts from stakeholders and government authorities can pave the way for a thriving IT industry, contributing significantly to the nation’s economic progress and global standing.
