- By Bhakta Raj Joshi

Technological innovations and the rise of digital labour platforms have made it easier for individuals to increase their earnings through profitable recreation. Such advancement has interconnected people and markets globally, which provide platforms for business-to-business (B2B), business-to-consumers (B2C), business-to-government (B2G), and government-to-government (G2G) connections. As a result, interconnectivity empowers companies with insights into consumer preferences, thereby enabling the development of products designed to meet market demands. The use of digital platforms, cloud computing, big data, open-source innovation, artificial intelligence, robotics, and algorithms has provided flexibility to the stakeholders – buyers, sellers and producers.

Nepal borders two of the world’s fastest-growing economies – India and China. Nepal has eight of the world’s 14 highest mountains, an abundance of natural resources, and multidimensional cultural heritage attracting tourists globally. Despite having these enticing features, Nepal has not been able to tap its growth potential due to prolonged political uncertainty. Nepal's effort towards the digital economy is the integration of planned initiatives that have envisioned higher technology uses to enhance trade, industry and innovation. The government wants everyone to take the benefits of economic growth. Three tiers of government (federal, provincial and local) and the private sector are rigorously working to promote digital technology to make this happen. Nepal stands on the point of cracking new opportunities in the digital age.

Experiences and Good Practices

The advanced technology has generated sufficient opportunities in global markets which Nepal is adopting in the domain of trade and industry, and other sectors of the economy. The government has acknowledged the fact that trade and industrialisation are the matter of multi-sectoral concern. That is why it is fostering cooperation between subnational governments, private sector and development partners. The Ministry of Industry, Commerce and Supplies has been playing a principal role in modernising the overall trade and industrial environment and encouraging innovation. Initiatives such as National Strategy on Development and Use of E-Commerce, 2020; Integrating Advanced Concepts of Industry 4.0 in Manufacturing Processes in NTIS 2023; and the Digital Nepal Framework (DNF) are some of the initiatives taken by the government. One-stop Service Centers, Electronic Single Windows, online platforms, etc are facilitating smooth trade and foreign direct investment procedures. 

Government Initiatives

The government has implemented several initiatives to foster the growth and strengthen the digital economy in the country. It implemented the "National Strategy on Development and Use of E-Commerce" in 2020. The government is also finalising an E-Commerce Bill after extensive consultations with stakeholders to standardise and promote online trading activities. The Bill is currently under deliberations in parliament.

Other key measures include launching the Nepal Trade Integration Strategy (NTIS) 2023, which mandates the Ministry of Industry, Commerce and Supplies to formulate and implement an Industry 4.0 Strategy. The ministry has also established a one-stop service centre and online services to simplify trade and industrial procedures and facilitate foreign direct investment approvals.

Likewise, the government has implemented the Nepal Trade Information Portal, operated by the Trade and Export Promotion Center, as a comprehensive resource for trade-related information. It has also launched the National Trade Deficit Reduction Action Plan, focusing on promoting goods from women entrepreneurs and small industries through an electronic marketplace.

Additionally, the government has piloted innovative solutions such as the Electronic Cargo Tracking System, startup business promotion, and a traceability system for organic orthodox tea to enhance product quality. Nepal has also established the "msmenepal.com" e-commerce portal in collaboration with the Federation of Nepal Cottage and Small Industry to promote domestic and international trade for small businesses.

To foster collaboration, the government has formed the National Trade Facilitation Committee involving government agencies and private sector stakeholders. It has also published import-export regulations on a website and operationalised a national trade repository to enhance accessibility and transparency.

Nepal has signed a memorandum of understanding with India for cross-border digital payments to facilitate transactions for businesses, students and tourists. The government has invested in capacity-building programs to train customs officials, border agencies and private sector actors on digital trade procedures and technologies. Furthermore, the government is improving the digitisation of transport infrastructure and logistics processes, including implementing electronic tracking systems for cargo and digitising transport documentation and payments.

From spearheading the Nepal Trade Integration Strategy to promoting digital payments and streamlining trade processes through one-stop service centres, the government has demonstrated its commitment to embracing digital transformation.

Nepal has also taken steps to promote digital payments through various policy measures, such as launching a national e-payment gateway and encouraging mobile banking and mobile wallets facilitated by digital payment providers like FonePay, eSewa, Khalti, Prabhu Pay, IME Pay, Smart QR and digital payment platforms of banks and financial institutions.

According to the Nepal Telecommunication Authority, the population penetration based on total subscribers of voice telephone services and broadband services stood at 119.19% and 139.63%, respectively, in 2023 indicating the potential for a digital future in the country.

Challenges

Although Nepal has put significant efforts to build a digital economy, there still are various challenges. Some of them are outlined below:

Coordination Gaps and Limited Resources: Despite the commitment of the government, there is a lack of coordination among the stakeholders. Nepal recognises logistical challenges, such as inefficient transportation networks and customs procedures, as barriers to the development of cross-border e-commerce. Streamlining logistics and enhancing trade facilitation measures are essential to unlock the full potential of digital trade and improve market access. Trade facilitation efforts in the country have faced obstructions due to resource constraints.

Strengthening the E-commerce Ecosystem: The implementation of the e-commerce strategy has not been effective as this sector faces challenges such as infrastructure development, legislation and access to financing. These hurdles have hampered the prospects of the digital economy.

Industry 4.0 Integration: Nepal's ambition to integrate Industry 4.0 and 5.0 concepts into its production processes is praiseworthy. However, the absence of a comprehensive strategy along with the investment plan, coupled with deficient infrastructure and systems, pose significant obstacles to this transition. 

Skill Enhancement Programs: Investing in skill enhancement programs is crucial to bridge the digital divide and equip the workforce with the necessary competencies for the digital economy. Training initiatives tailored to the needs of various sectors can enhance the employability and productivity of workers in the digital era. 

Infrastructure Development: Addressing infrastructure deficiencies, particularly in remote and underserved areas, is imperative to ensure widespread access to digital technologies and services. This includes expanding broadband connectivity, improving electricity supply reliability and enhancing digital infrastructure resilience. 

Financing Constraints: Access to finance remains a significant challenge for digital startups and enterprises. Developing mechanisms to facilitate access to capital, such as venture capital funds and angel investment networks, can fuel innovation and entrepreneurship in the digital economy. 

The way forward

A practical and multifaceted approach is necessary to address and mitigate the challenges that are hindering development of the digital economy in the country. Some of the suggestions include:

Legal and Regulatory Reforms: The utmost priority of the government should be in updating existing laws and enacting new legislation to provide clarity and safeguards for the digital landscape. Key actions in this sector include amending the Electronic Transactions Act, 2008, to address data protection concerns, establishing protocols for data breach notifications and mandating the localisation of personal data storage.

Investment in Industry 4.0 Technologies: The government must draft and implement robust strategies at both national and provincial levels for adoption of Industry 4.0 technologies. This involves investing in research and development centres, establishing data repositories, and enhancing digital infrastructure to support innovation and connectivity. Embracing digital modelling, procuring necessary equipment and developing national payment gateways are crucial steps in laying the groundwork for a flourishing digital economy.

Capacity Building and Skill Enhancement: Prioritising capacity-building programs and skill enhancement initiatives is essential to empowering Nepal's workforce to adapt to the evolving demands of the digital age. Organising training sessions and workshops on Industry 4.0 and 5.0 technologies will equip workers with the necessary skills to enter a digital economy.

Strengthening Trade Facilitation Measures: The government should continue to leverage its transit facilitation agreements with neighbouring countries and implement measures to streamline cross-border trade procedures. Enhancements in risk management, authorised economic operators and expedited shipments will facilitate smoother trade processes. The National Trade Facilitation Committee should play a central role in overseeing the implementation of these strategies and coordinating inter-agency efforts to enhance trade facilitation. Improving coordination: Improving coordination between different government agencies at federal, provincial and local level, and coordination between government agencies and the private sector is also needed to accelerate the process of digitising the economy.

Conclusion

Nepal's journey towards creating a vibrant digital economy is marked by practical initiatives, strategic policies and collaborative efforts aimed at leveraging technology for inclusive economic growth and trade facilitation that leads to a shift in the national economy. From spearheading the Nepal Trade Integration Strategy to promoting digital payments and streamlining trade processes through one-stop service centres, the government has demonstrated its commitment to embracing digital transformation. Despite challenges, including trade facilitation gaps and regulatory constraints, Nepal remains steadfast in its pursuit of a prosperous future in the digital era. Several legal reforms, robust strategies and capacity-building initiatives have been introduced by the government to unlock new opportunities and drive sustainable progress in the digital economy, presenting itself as a competitive player on the global stage. 

(Joshi is an Under Secretary at Ministry of Industry, Commerce and Supplies)