Nepal, June 1 – The country’s landlocked position and logistic challenges have led to significant trading bottlenecks, exacerbated by its dependence on India as an entry point. With the world moving toward a ‘borderless and weightless’ economic framework focused more on intellectual property and technological advancements than tangible goods, Nepal now has an opportunity to circumvent these constraints. By fostering a knowledge-driven economy encompassing sectors from agricultural technology to digital services, new avenues for expansion could be opened up. Countries like Estonia with their advanced e-governance systems and Rwanda through its innovative use of technology demonstrate that nations lacking abundant resources can still prosper by harnessing their human potential and developing robust digital infrastructures.
Nepal heavily depends on remittances and labor exports—primarily from unskilled workers—which raises concerns regarding sustained growth and fair development. Although these remittances account for approximately 26% of Nepal’s GDP, they mainly boost consumer spending instead of fostering productive investments. The traditional carpet sector has seen a decline recently. Furthermore, nearly half of the Nepalese workforce sent abroad consists of individuals with limited skills. This situation not only squanders valuable human capital but also hinders efforts to build up domestic manpower effectively.
According to Nepal Rastra Bank, approximately 82% of the nation’s revenue from exported goods is counterbalanced by the expenditures incurred by Nepalese students studying overseas. This situation exacerbates two major issues: financial outflow and loss of skilled individuals. Given that Nepal grapples with elevated trading expenses, precarious logistics networks, and diminishing prowess in exporting products, relying solely on tangible commodities will not suffice for building a robust economy. Considering that our favorable age structure persists only up till 2047, immediate action is imperative. It is crucial to invest in developing human resources, enhancing specialized competencies, and fostering innovation to capitalize on this critical period.
Emerging knowledge-based sectors
Nepal does not have to envision a knowledge economy—it already thrives in certain areas of expertise. The Tilganga Eye Hospital stands out as a prime example of this success. Established by Dr. Sanduk Ruit, Tilganga has emerged as a global emblem of innovative medicine originating from Nepal. Through streamlining cataract operations and manufacturing cost-effective intraocular lenses (IOLs), Tilganga has helped restore vision for countless individuals throughout Asia and Africa. These portable, economical lenses exemplify how knowledge-driven commerce transcends physical boundaries. Many members of the Nepalese diaspora now return home for various treatments like eye surgeries, dental work, and comprehensive health examinations due to affordability reasons. This trend underscores significant opportunities within Nepal’s burgeoning medical tourism sector. Should similar models be adopted in different branches of healthcare, they might propel Nepal into becoming a leading provider of specialized medical services internationally.
A rising cornerstone of the economy is the Information Technology industry. According to research conducted by the Institute for Integrated Development Studies (IIDS), this sector now accounts for approximately 2% of the country’s Gross Domestic Product (GDP). This figure includes IT export earnings amounting to $515 million in 2022. The government aims ambitiously to boost these figures significantly, targeting Rs3 trillion worth of exported goods and services from the IT sector within the coming decade.
Companies such as Fusemachines (specializing in AI technology), SecurityPal (focusing on cybersecurity), and Incessant Rain Studios (expertise in VFX and animation) demonstrate that Nepal possesses the capability to rival global players in delivering premium digital services. Additionally, innovative enterprises like Gham Power exemplify how new ventures can tackle domestic issues; they leverage solar power and cutting-edge technologies to enhance climate adaptation among rural populations across Nepal.
Bedrock of knowledge economy
Education serves as the foundation for the knowledge-based economy; it drives the development of human resources. However, this driving force appears to be faltering in Nepal. Particularly concerning is the state of primary education where learning deprivation continues to pose significant challenges. The National Assessment of Student Achievement (NASA) reported in 2020 indicates that merely 43.5% of third-grade pupils achieve the required standards in reading skills, with an even lower percentage—only 37.2% —meeting expectations in mathematics. This trend persists into later grades: at eighth grade, only 32.1% display fundamental mathematical competence, and around 37.7% do so in science. Such statistics underscore persistent systemic issues, indicating that educational opportunities in Nepal have frequently failed to yield meaningful outcomes.
The problem with student retention and success rates is critical. Out of approximately 928,000 pupils who began Grade 1 in 2015, fewer than half (just 45%) made it to the 2024 Secondary Education Examination (SEE). In 2024, more than 52% of students taking the SEE received failing grades, and 47% did not pass their Grade 12 exams. When following up on those who entered Grade 1 back in 2011, merely 15% consistently progressed through to successfully complete Grade 12 in 2024, highlighting significant attrition throughout these years. The escalating pattern of educational setbacks isn’t just concerning—it poses a serious threat as a nationwide crisis jeopardizing Nepal’s potential for growth based on knowledge capital.
The higher education system in Nepal is encountering substantial hurdles. As per the EMIS report for 2023-24, despite having 12 central and 4 provincial universities across the nation, Tribhuvan University stands out as it encompasses about 78% of all university enrollments. Such an imbalance has resulted in operational inefficiencies within the structure, promoting broad-based learning over specialized fields, along with heightened political involvement because of its predominant role. Between 2015-16 and 2023-24, student enrolment surged by 75.3%, yet graduate numbers climbed merely by 7.9%. This discrepancy points towards inadequate alignment between courses offered and market demands, coupled with rising instances of students departing abroad prior to finishing their degrees. Consequently, even among those who stay behind, skill acquisition remains suboptimal.
Only 17 percent of students are enrolled in STEM fields, even though global demand for STEM jobs is growing three times faster than for non-STEM roles. The problem also extends to the Council for Technical Education and Vocational Training (CTEVT). Despite the wide range of programmes offered by CTEVT, actual enrollment and graduation rates are falling, especially in key sectors like engineering, nursing and dental. This leaky pipeline worsens with a massive student exodus-over 336,000 NOCs issued in three years from 2020-21 to 2022-23, averaging 110,000 annually, while only 97,564 students graduate each year.
From education to innovation
Enhancing long-term educational achievements in Nepal necessitates significant policy overhauls. It’s crucial to invest in basic cognitive abilities, tackle inequalities, and implement effective measures such as supplementary tutoring for underperforming pupils. For Nepal to succeed in the international knowledge-based market, it must revamp its approach to education by setting up specialized bodies akin to India’s IITs and IIMs, along with Centers of Excellence focused on Technical and Vocational Education Training (TVET), which align closely with industrial requirements. The updated curriculum ought to prioritize Science, Technology, Engineering, Mathematics (STEM), digital literacy, and critical thinking, fostering robust partnerships between academia and industries.
Another crucial element is English proficiency. In the period from 2023 to 2024, merely seven percent of Nepalese individuals who took the IELTS examination achieved a score of band 7 or above. This figure contrasts with more favorable percentages observed in countries like the Philippines at nine percent, Malaysia at twelve percent, and India at seventeen percent. Enhancing English language instruction via better-designed curriculums, peer-supported study sessions, and community-driven language assistance programs could greatly boost international job prospects for Nepali students upon graduation. Policies promoting research, fostering innovation, and supporting startups ought to play key roles in driving these changes forward. Additionally, Nepal needs to shift away from traditional testing-focused educational methods. Building an economy based on knowledge requires valuing one’s greatest asset: young people whose curiosity remains largely unexplored.
Conclusion
Nepal’s primary advantage stems from leveraging its human talent within knowledge-oriented industries. This transition has the potential to enhance its soft power via innovative solutions and specialized skills. The nation benefits significantly from its worldwide expatriate community, which facilitates the exchange of knowledge, fosters entrepreneurial ventures, and encourages international cooperation. According to the Asia Power Index 2024, Nepal places 25th among 27 nations, serving as an overall gauge of Asian countries’ capabilities and influences derived from various assets and clout.
For progress, Nepal needs to focus on building a knowledge-driven economy through improved education, enhanced research capabilities, and advanced technological adoption. Achieving this involves coordinated reforms and targeted plans across various sectors, backed by robust policies and institutions dedicated to nurturing talent and fostering enduring economic expansion.
