Intrusions in Digital Productivity in Digital Nepal

In Nepal, the digital economy is becoming an increasingly important part of the country’s economic landscape. The widespread adoption of digital technologies and the increasing availability of high-speed internet has led to the growth of numerous digital products and services. With over 40,000 e-commerce sites operating in the country, businesses and individuals are now able to access a wide range of products and services at their fingertips. Furthermore, the total broadband penetration rate in Nepal, as of mid-January 2023, is 130.64% (mobile broadband at 93.18% and fixed broadband at 37.46%) compared to 122.51% (mobile broadband at 90.90% and fixed broadband at 31.62%) in the as of mid-January 2022. This growth in connectivity is a clear indication of the growing importance of the digital economy in the country and the potential for increased digital productivity.

At the heart of this growth is digital productivity – the ability to effectively utilize digital tools and technologies to increase efficiency and streamline workflows. As the digital economy continues to grow, so too does the importance of digital productivity in driving economic growth and prosperity. Although digital productivity offers numerous benefits, individuals and businesses in Nepal continue to face challenges in fully realizing its potential. The sections below examine the different intrusions present in the digital sphere, which are impeding digital productivity.

Intrusion in Digital Spending

Nepal Rastra Bank (NRB)’s modernization of payment systems through the formulation of Nepal Payment System Development Strategy, Payment and Settlement Bylaws, 2072, and the establishment of the Payment and Settlement Department and the Payment and Settlement Act, 2075, have been instrumental in facilitating the adoption and usage of digital payments in the country by providing a legal and statutory framework and defining the payment instruments. However, NRB has set a spending limit on transactions made through mobile applications and Quick-Response (QR) codes. As per the  Unified Directive on Payment System-2023, customers can now transfer funds up to NPR 300,000 (USD 2282.06) from the previous NPR 200,000 (USD 1521.37) but the monthly transaction limit has remained unchanged at NPR 1 million (USD 7606.87). This limit on monthly digital transactions defeats the purpose of increasing the daily transaction limits through a digital wallet and can compel users to revert to traditional payment methods after the transaction limit has been reached. Additionally, the unavailability of a proper international payment gateway has hindered access to global trade and markets as businesses can become reluctant to engage in cross-border transactions, which can limit their ability to grow and expand their customer base. Additionally, cheques remain one of the preferred means of fund transfer and payments in Nepal, indicating the general public’s lack of trust and awareness of digital payment systems.

Intrusion in Disruptive Technology

Disruptive technology has the potential to revolutionize industries and jumpstart economies, making it a catalyst for development. With their ability to create new markets and transform existing ones, disruptive technologies like Artificial Intelligence (AI), Machine Learning (ML), blockchain, and cryptocurrency have become the driving force behind many of the world’s most successful companies. These technologies offer significant advantages such as increased efficiency, reduced costs, and improved customer experiences, making them critical to remaining competitive in the global market.

However, Nepal has been a late bloomer in adopting disruptive technologies. Even after the late adoption, instead of facilitating the usage of such technologies, the Government of Nepal issued a directive banning and prohibiting Nepali citizens, living in Nepal and overseas, from engaging in any form of cryptocurrency transactions, including buying, selling, or trading cryptocurrency. This directive is seen as an intrusion on individuals’ autonomy and hinders their access to potential financial benefits that come from trading and investment in cryptocurrency. The ban also restricts the country’s ability to fully explore and utilize the benefits of blockchain technology, which could improve financial transparency and security, reduce transaction costs, and increase the efficiency of remittance services. This lack of access to innovative financial technologies is a significant hurdle for Nepal’s digital growth and could impede the country’s ability to compete in the global market.

Intrusion in Rural-urban Connectivity

The licensed telecommunication and internet service providers (ISPs) contribute 2% of their annual income to the Rural Telecommunications Development Fund (RTDF) of the National Telecommunications Authority (NTA) for the development, extension and operation of Telecommunications Services in the rural areas. Through RTDF, Nepal has achieved many feats in terms of rural-urban connectivity, like providing free internet service to 16,117 public bodies including local bodies, health institutions and secondary schools in 74 districts. Additionally, Connectivity in Least Developed Countries Status Report by International Telecommunication Union (ITU) shows that Nepal falls behind India, Sri Lanka, and Pakistan in terms of affordable digital access , where the cost is less than 1% of Gross National Income(GNI) as compared to the 2.6% of GNI in Nepal. This impedes the adoption and usage, limiting the potential for digital productivity growth. Additionally, there is still a lack of awareness and acceptance of technology in rural areas, contributing to the rural-urban divide. Even in urban spaces, frequent network outages can cause disruptions in connectivity. These challenges need to be addressed to bridge the rural-urban connectivity gap and ensure equal access to information and opportunities.

Intrusion in Acquiring Digital Skills

The range of projected yearly sales for Nepal’s software and IT services sector is USD 200 million (NPR 26.29 billion) to USD 1 billion (NPR 131.46 million). Given the frequently changing landscape and trends in the ICT sector, skilling and reskilling are vital to ensure that workers have the necessary knowledge and skills to adapt and succeed in the industry. According to the Coursera Global Skills Report 2022, Nepal ranks 77 among 102 countries, a drop of 18 ranks from the year 2021, indicating a significant gap in digital skills and education. Despite the potential of online learning to boost the digital skills of people, weak IT infrastructure of Nepal coupled with the absence of a comprehensive digital skills development program in Nepal has acted as a barrier to individual growth. The importance of e-learning and online education in bridging this gap cannot be overstated since there is an increasing trend of acceptance of online degrees and skills acquired through online means, although there may be ongoing debates about its effectiveness.

Way forward

To effectively address the digital productivity intrusions in Nepal, the government must take concrete and practical steps. For instance, in promoting digital payments, the government should focus on increasing the monthly limits on transactions parallelly with the spending limits on daily transactions and establish proper international payment gateways. However, it is equally important to address the lack of trust in digital payment systems among the general public through awareness campaigns.

To embrace disruptive technologies such as AI, ML, blockchain, and cryptocurrency, Nepal needs to create a robust framework with a proper roadmap and a supportive policy environment. This may involve revising the current Digital Nepal Framework (DNF) to include a new approach for the adoption of technology in various sectors. The government should prioritize addressing the lack of awareness and acceptance of technology in rural areas and bridging the rural-urban connectivity gap. This can be achieved by utilizing the Rural Telecommunication Development Fund (RTDF)  to promote digital awareness and usage of ICT services in rural areas.

Additionally, the government should establish digital skills development programs in various regions, particularly targeting rural areas, to ensure equal access to digital skills and education throughout the country through its local units. A sustainable plan should also be developed to promote online learning and e-learning in Nepal, including efforts to bridge the digital divide by involving local governments. The government can partner with private institutions and organizations to offer training and education programs on digital skills, thereby empowering individuals to participate actively in the digital economy.