Will Nepal be the Next Information Technology Hub ?

Amid the majestic Himalayan mountains, a quiet revolution is underway that could transform Nepal into the next global tech powerhouse. Nepal may be better known for its stunning landscapes and rich cultural heritage, but a new generation of tech entrepreneurs and innovators is fast becoming an emerging IT hub to watch.


Key Factors Driving the Growth of Nepal’s IT Sector

Nepal’s IT sector has been experiencing steady growth in recent years, driven by several key factors. Firstly, the country has a large pool of skilled and educated IT professionals who are readily available to work in the industry. Additionally, the relatively low salary rates in Nepal’s IT sector make it an attractive destination for technology companies looking to outsource their operations. The ongoing improvement in the country’s digital infrastructure, such as internet connectivity and power supply, has also been significant contributors to the sector’s growth.

The Nepali government has played a pivotal role in promoting the IT industry through various initiatives, including tax incentives and skill development programs. One of the government’s flagship initiatives is the Digital Nepal Framework (2019), which aims to transform Nepal into a digitally empowered society and knowledge economy. The Digital Nepal Framework is a comprehensive plan to accelerate the country’s digital transformation. The aim of the framework is to advance digital technologies to drive economic growth, improve public services, and enhance the overall quality of life for citizens. The framework consists of eight sectors and 80 digital initiatives, which are categorized into three pillars:

  1. Digital Foundation
    1. Digital Connectivity
    2. Digital Skills
    3. Digital Governance
  2. Digital Economy
    1. Digital Payments
    2. E-Commerce
    3. Digital Tourism
  3. Digital Society
    1. Digital Health
    2. Digital Education

The Digital Nepal Framework was approved by the government in 2019 and has been included in the 15th plan as a game-changer project. The framework has been implemented through various initiatives, including the development of the Nagarik App, which provides citizens with access to government services and information. This framework focuses on areas such as digital infrastructure, digital services, digital economy, and digital governance, creating an environment for the IT sector to thrive. 

Furthermore, Finance Minister Barshaman Pun commented on the budget of the fiscal year 2023/24 at the joint meeting of the federal Parliament. He said that 3 Trillion rupees of exports would be made in the Information Technology Sector in the upcoming 10 years. Minister Pun also mentioned that in the field of IT, high speed, reliable and high-quality internet services and intellectual property protection will be ensured with stable policies. A total of NPR 690 Million has been allocated in the 2024/25 budget for the Digital Nepal Framework project to boost digital initiatives and infrastructure development. 

Moreover, Nepal has been attracting increasing foreign investment as multinational companies recognize the country’s potential as an outsourcing and software development hub. Favorable demographic trends, with a median age of 24 and a large, young, and tech-savvy population, provide a strong talent pool for the IT sector. Finally, the emergence of innovative IT startups and a thriving entrepreneurial culture have also played a crucial role in the expansion of Nepal’s technology industry.


Economy Contribution of IT Sector in Nepal

According to data released by the Nepali government in August 2023, the IT sector in Nepal contributes around 2.5% to the country’s GDP. This is a significant increase from 2020, when the IT sector contributed only 2% to Nepal’s total GDP. The IT industry in Nepal has been growing steadily over the past few years, largely due to increased investment and development of digital infrastructure.

Nepal’s IT sector is estimated to be worth around $300 million annually, encompassing software development, business process outsourcing, and other technology-driven services. Major IT companies operating in Nepal include Leapfrog Technology, Deerwalk, InfoDevelopers, Fusemachines, Ncell, and eSewa, employing thousands of skilled IT professionals. The growth of Nepal’s IT sector has become an increasingly important contributor to the country’s overall economic development.


Government Plans for Driving the Growth of Nepal’s IT Sector

The Nepali government has been proactively taking several steps to attract foreign investment and improve the IT infrastructure in the country. One key initiative is the expansion of broadband connectivity, with the government setting a target to provide high-speed internet access to 80% of the population by 2025, supported by the World Bank’s Nepal Broadband Project. 

Additionally, the government is establishing IT parks, such as Banepa IT Park and Bhaktapur IT Park, and a Knowledge Park at Khumaltar in Lalitpur, as well as the Lumbini Special Economic Zone, to focus on technology and innovation, providing reliable power, connectivity, and infrastructure support to drive both domestic and foreign tech investment. However, an Information Technology (IT) Park that was established in Banepa in 2003 with the aim of promoting information technology and services, has not been functioning properly due to political instability. 

To further bolster the IT sector, the government is working to improve power supply, having recently expanded hydropower generation to enhance power stability and the availability of renewable energy sources. The government is also streamlining the regulatory environment, simplifying business registration processes and setting up “One-Stop Service Centers” to provide a single-window clearance system for foreign investors.

Recognizing the importance of talent development and skill enhancement, the government is collaborating with academic institutions to strengthen computer science and engineering education, while also launching initiatives like the “Skill Mela” to foster skill development. 

Furthermore, the government is offering attractive fiscal incentives, such as tax holidays and concessions, to foreign tech companies investing in Nepal, and has established the dedicated Investment Board of Nepal (IBN) to provide comprehensive support and facilitation services to potential investors.

As mentioned above, the Investment Board of Nepal (IBN) plays a crucial role in facilitating and promoting foreign investment, which includes the technology sector of the country as well. IBN has been successful in facilitating investments from several prominent foreign tech companies in Nepal. Some of the instances are:

  • F1Soft Group:

F1Soft Group is a leading fintech and IT solutions provider in Nepal, with a presence in several other South Asian countries. The company has received investments from regional and global investors, with the IBN playing a key role in facilitating these transactions and providing ongoing support. F1Soft’s growth and the IBN’s involvement in its investments have helped promote Nepal as an attractive destination for fintech and software development companies.

  • e-Sewa:

e-Sewa is a prominent digital payment and e-commerce platform in Nepal, with a significant presence in the country’s fintech sector. The IBN facilitated this investment by providing support with regulatory approvals and ensuring a seamless investment process.

  • Deerwalk:

Deerwalk is a Nepali tech company that has attracted significant foreign investment, including from US-based venture capital firms. The IBN has worked closely with Deerwalk to facilitate its growth and expansion, providing guidance on regulatory compliance, tax incentives, and other operational support. Deerwalk’s success has helped showcase Nepal’s potential as an emerging destination for technology startups and innovation. 


Nepal’s journey to becoming the next IT hub in South Asia is far from complete, but the signs are promising. The country has steadily been building the foundations necessary to support a thriving technology industry, from improving digital infrastructure to fostering an entrepreneurial ecosystem and nurturing a skilled talent pool.

The Nepali government’s proactive approach, through initiatives like the Digital Nepal Framework and the establishment of IT parks, has been instrumental in creating an enabling environment for the IT sector to flourish. The introduction of tax incentives, streamlining of regulations, and dedicated investment facilitation services have all helped to attract the attention of global technology companies and investors.

While challenges remain, such as political instability and the need for further investment in research and development, Nepal’s inherent strengths – including its cost-competitiveness, growing startup culture, and the increasing foreign direct investment – position the country as an emerging destination for IT and innovation. As the country continues to build on these foundations, the potential for Nepal to become a regional tech hub in the coming years appears increasingly promising.

With the right policies, investments, and a sustained focus on developing digital skills and infrastructure, Nepal could very well realize its ambition of becoming a leading IT hub, reaping the economic and social benefits that come with a thriving technology sector. The future looks bright for Nepal’s IT industry, and the country’s journey to this destination is one worth closely following.

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