It is important for Nepal to promote goods and services that do not pass through any border barriers and do not have to pay customs duties. But what are such goods and services? One area where the question of boundaries and weights does not arise is information technology services.

By joining the global digital economy and value chain, Nepal can set a journey of gradual economic transformation through the unlimited benefits that can be obtained from the world of information technology. The immense potential and progress of this sector, which has been shown by various studies in recent times, has indicated that we should not delay in removing the challenges of exporting information technology services and reaping significant benefits from it. 

Digitization process of every sector has brought a wave in the employment market of Nepal, even if it is a small one. Fintech, e-commerce and ed-tech sectors are showing significant attraction. According to a self-authored study on information technology services exports by the Center for Inclusive Development Studies (IIDS), about 9,000 graduates enter the job market in the information technology (IT) sector every year. Among them, the number of people who have studied information technology is 7 thousand 85. Along with this, 35.5 percent of manpower from other sectors also joins the IT sector annually. This reflects the attraction towards IT and the possibility of increased employment opportunities. 

The development and increasing use of digital technology has brought a massive change in the way people work. IT services can be provided to national and international customers at home without going outside the country. It has reduced geographical barriers and the traditional job-oriented trend of being in the office from 9 am to 5 pm. Especially after the Covid-19 epidemic, the labor market of 'remote working', where you can work from anywhere without going to the office, and 'gig economy', the labor market of temporary work done independently for a short period of time, seems to have flourished. The gig economy has opened up new dimensions for both full-time and part-time jobs. The number of IT manpower involved in the gig economy for the main source of income, second source and additional sources is seen to be around 66 thousand 509 in Nepal. 

Our study shows that 77.8 percent of job offers to Nepali IT companies and freelancers come mainly from USA, Europe, UK and Australia. However, recently IT companies from countries with growing economies in Asia and the Middle East such as the United Arab Emirates, Bahrain, Bangladesh, Bhutan, Indonesia, Japan, Korea, Malaysia, Singapore, and Thailand have also increased their tendency to hire Nepali IT personnel. About 44.4 percent of IT companies in Nepal are run as private companies, i.e. they have sole ownership. Other companies have gone into partnership. In 87.5 percent of the partnerships, only Nepalis are involved, while 3.1 percent have foreign partners and 6.3 percent have both Nepali and foreign partners. Similarly, in 3.1 percent, Nepali and non-resident Nepali partners are seen.

Nepali IT companies are providing services like coding, programming, design, software development, social network management, video editing, animation, content production and improvement, gaming, hardware production to foreign customers. Mainly in the fields of blockchain, AI, cloud computing, cyber security, data science, software development, high demand of foreign customers has been seen. Not only this, the data shows that the demand for Nepali IT manpower is increasing every year, from search engine optimization to communication and network work, to various creative work.

Nepali IT companies should take various initiatives to attract more foreign clients and create a supportive environment so that their presence abroad is even stronger. The government should adopt various strategic measures to promote Nepal's IT services as a sector with high potential at the international level. IT companies should be encouraged to participate in international events and forums. Through these opportunities, companies can promote their services and learn about the latest efforts of IT companies in other countries. The government should be able to use diplomatic relations with foreign countries to attract foreign investment in the IT sector and help in business partnerships for the future. 

Effective slogans and necessary branding strategies should be prepared and the IT services of Nepal should be recognized at the international level as an emerging sector with more potential. For this we can take Bangladesh as an example. There, the government has launched a massive campaign to make communication and information technology the main basis of the country's economic development by the year 2041 with the slogan 'Digital Bangladesh'. Bangladesh government celebrates December 12 as 'Digital Bangladesh Day'. They have announced the four pillars of Digital Bangladesh, Human Resource Development, Digital Government, Promotion of ICT Industry and Connecting Citizens. This initiative seems to have significantly helped the development of the digital economy there.

Currently, more than 120 companies in Bangladesh are exporting goods and services related to information technology worth more than 1 billion dollars to 35 countries. Bangladesh aims to increase this export to 5 billion dollars by 2025. Before the start of covid in our country, the government had taken a good initiative in promoting the tourism sector with the slogan 'Visit Nepal 2020', which also helped in attracting tourists. It is high time that such campaigns should be conducted to promote the IT sector. As the contribution of information technology industry around the world is increasing, we should be serious about the possibility of reaping substantial benefits from it. Not only manpower, Nepal's geography, Himalayan temperature are suitable for operation and promotion of information technology industry. The world's booming data center business can naturally be operated in our cold mountain regions, because a cold place for a data center is a must-have infrastructure. 

Despite being a country surrounded by two large production-oriented economies, Nepal has relatively difficulties in exporting goods due to the limitations of being landlocked. Therefore, IT services export can be a significant opportunity for us in terms of ease of production and supply. In order to further increase the remarkable growth of this industry in Nepal in recent years, it is necessary to urgently address the existing problems. The political and administrative sector understands the importance of IT service export and it can become easier to create more opportunities. 

According to IIDS study, IT services worth 67 billion rupees have been exported from Nepal annually. This is 1.4 percent of Nepal's total economy in terms of foreign exchange reserves in the base year 2022. The promising growth in service exports of Nepal's IT sector gives a glimpse of the significant contribution it can make to the national economy and job creation in the future. For a country like Nepal, service exports are the present and the future, which can also help reduce the existing high trade deficit. By increasing the potential of IT services and providing more employment opportunities, the proper management and encouragement of the IT sector can also become a means to reduce the impact of the current rapid manpower migration and the crisis of knowledge (brain drain). 

Inadequate digital infrastructure, limited and confusing policy structure, lack of skilled manpower, insufficient efforts to utilize the potential, restriction on payment system, unscientific and abstract tax system, institutional arrangements and some social structures are seen as challenges to the development of IT sector. Even though the communication infrastructure or connectivity in urban areas has improved, its reach and usage across the country is yet to be widened. Availability of high speed internet services, high capacity local data centers, disaster recovery centers along with high capacity information technology highways are also required. Another major problem faced by all types of service export industry including IT is unclear, double-edged, narrow-minded policies and laws. 

In the IIDS survey, about 70 percent of the respondents said that there is no proper policy framework for the development of the information technology sector in Nepal. Necessary laws on intellectual property protection, data privacy and security have not been enacted. There is also a need for the government to urgently address signs of potential restrictions on cross-border data flows. The budget for the financial years 2022 and 23 included the minimum limit of foreign direct investment, 50 percent tax exemption for companies providing outsourcing services. Even though IT service export has given some boost, there is still a need for adequate and clear policies and rules for all-round development in terms of incentives. 

Another problem in the IT sector is the shortage of skilled manpower. In IIDS's survey, 74.2 percent of company directors questioned the quality of education in Nepal. They have identified this as a major problem and responded that it has a major impact on productivity. Therefore, it appears that quality should be enhanced through improvements in the educational system and additional training opportunities. If educational institutions invest in research and development and encourage students to engage in creative projects from an early age, it will help the development of this sector. 

In order to address the problems related to the payment system faced by IT service exporting companies and human resources, it seems necessary for banks and financial institutions to provide information about the practices of the global IT industry. Difficulties in public service delivery and ambiguity in the tax system have also added challenges to the IT sector. Another important aspect is the lack of effective institutional mechanisms. Stakeholders have felt the need for an autonomous organization to promote the IT sector. Such an autonomous organization can play a role in prioritizing the formulation and implementation of laws, planning policies necessary for the development of this sector.

The IT service export sector, which has emerged as an opportunity for economic transformation and growth of the country, is very important for Nepal. We have seen that it has contributed significantly to the gross domestic product and foreign exchange earnings. Therefore, policy, implementation, improvement in innovation and entrepreneurship, development of public-private partnerships as well as stakeholder collaboration are needed to fully utilize the potential of this sector for further development and job creation. It seems important for us to create a favorable environment to make a significant impact on the global scene. 

Sharma, who led a survey study on IT service exports conducted by IIDS, has studied employment in IT services.