Many factors explain why some countries prosper while others stagnate. At its core, however, no country with predictable rules and a population equipped with productive skills remains poor. With the first condition in place—about which I have already written in this column—what matters most next is skills. A well-skilled population produces abundantly at home and competes in foreign markets.Without them, prosperity is not delayed; it is structurally blocked.
Skills are not innate. They are built through education, which converts human potential into productive capability. When education falls short, skills do not accumulate, innovation does not emerge, and economies stagnate. Our education system has failed at this core function.
Failure to Scale Skills
Nepal’s education system absorbs enormous public and private resources, yet delivers weak outcomes. This is, above all, an inability to build skills at scale.
Out of every 100 students who entered Grade 1 twelve years ago, only about seven graduated this year without repeating a class. The rest either dropped out or fell behind. This pattern repeats year after year, with students lost early in the system. As a result, enrollment across grades is heavily concentrated in early years and collapses sharply at the secondary level. The number of students in Grade 12 is only about 40 percent of those in Grade 1. In countries where schooling functions reasonably well, the difference between early and later grades is very small.
This represents a massive waste of human capital. Public funds are spent and household savings are depleted. Yet years of schooling are consumed without translating into learning. This failure begins far earlier than even dropout statistics suggest. According toUNICEF56 percent of children aged 9–14 in Nepal lack the foundational literacy and numeracy skills expected at Grades 2–3. It points to a systemic failure in education quality that makes later skill formation increasingly unlikely.
Awareness about special needs education low in Nepal: Prof Jung
Even completing school does not guarantee skills. Curricula emphasize attendance, rote learning, and exam survival rather than problem-solving, discipline, communication, and applied competence. Education falls short not only in completion, but in relevance, leaving many graduates without market-relevant capabilities. In such a system, expecting a critical mass of people capable of building startups, innovative firms, or high-growth enterprises is unrealistic. Ideas do not scale where skills are thin.
The consequences are stark. According to a World Bank study, a child born in Nepal today is expected to realize only about 18 percent of his or her potential productivity as an adult, reflecting combined failures in education, health, and labor markets. Income levels could be several times higher if that potential were fully realized. This represents lost wealth and opportunity on a massive scale.
A Perverse Sorting System
Instead of equalizing opportunity, education sorts people into sharply different futures, offering a more promising path for those who can afford it and frustration for others. Students who acquire meaningful skills increasingly do so through private schools, while public schools, which educate the majority, struggle to deliver even foundational learning.
Although only about a quarter of students who sit for the nationwide Grade 10 Secondary Education Examination come from private schools, they account for roughly 85 percent of those scoring above 80 percent. Because spaces in public upper secondary education are limited, they are disproportionately taken by higher-scoring private-school students. The result is a system that systematically sorts poorer students out, at high national cost.
The divergence continues after secondary school. Students from private schools, aware of the limited returns to domestic higher education, increasingly pursue post-secondary education abroad. The bettereducated leave; many do not return,and their skills benefit foreign economies. Nepal finances early human capital formation, only to export the returns.Education, instead of anchoring prosperity, accelerates its leakage. At home, the economy remains trapped in low-value activity.
Students in public schools face a different but equally rational calculation. Knowing that schooling offers little chance of a good job at home, many disengage early. For them, completing Grade 10 becomes a formality rather than an investment. The logic is straightforward: if the likely future is manual work abroad, why struggle for high marks? Passing is enough; mastery is unnecessary. This is not a cultural failure but a rational response to incentives. When effort is not rewarded, motivation collapses. Education becomes a holding pattern before migration, not a ladder to productivity.
In effect, the earnings of low-skilled migrant workers help finance the foreign education of those who leave to acquire higher skills. This is how an initial inequality in learning is transformed into an even wider, persistent inequality in opportunity.
As a result, education fails on equity as well as efficiency. One group uses schooling as a stepping stone out of the country. The other experiences it as a queue for low-skilled labor migration. Very few experience it as a pathway to work at home. In such a system, the broad formation of skills required for a knowledge-intensive economy is unrealistic.
An Uphill Battle
The national cost of this failure is immense. The deeper problem is not a shortage of jobs, but a shortage of job creators. A well-educated workforce creates firms, expands production, and generates demand for labor. It is the backbone of prosperity, and Nepal has failed to build it. As a result, jobs remain exceptionally limited: only 6 percent of the working-age population is employed in the formal sector.
The common response to failures in the education system is to demand higher budgets. Spending may matter, but it is an easy and often misguided answer. The core problem lies not in funding levels, but in system design and incentives. Teacher recruitment, posting, and promotion remain politicized, while performance has no relevance. This undermines motivated teachers and normalizes mediocrity. A high-quality education system cannot be built without accountability at every level.
What makes this failure more troubling is the lack of political urgency. There is a reason. Elites and much of the middle class have exited the public system, relying instead on private schooling and education abroad. As policymakers and opinion-makers no longer rely on public education for their own children, pressure to improve quality has weakened, turning public schools into institutions of last resort. This divide has already taken hold, making reform politically difficult.
Taken together, education falls short in production, distribution, and reform, locking the country into persistent underperformance. Yet prosperity cannot be achieved by neglecting the education system. Skills must be built deeply and retained domestically. Education must be treated as economic infrastructure, not a social ritual or a migration queue.
Nepal faces a choice. It can continue with an education system that wastes resources, deepens inequality, and prepares young people to leave. Or it can undertake the courageous task of rebuilding education around skills, productivity, and opportunity at home. Until Nepal builds skills at scaleand gives those skills reasons to stay, prosperity will remain a promise endlessly postponed, not a future realized.
The author holds a PhD in Economics and writes on economic issues in Nepal and Canada. He can be reached at acharya.ramc@gmail.com
