A few decades ago, the absence of technology-driven growth in less-developed countries was excusable. Limited infrastructure, capital constraints, no access to technology, and late entry into global markets offered a convenient explanation. That excuse no longer holds. Countries such as Estonia and South Korea, once facing similar structural limitations, have transformed themselves into globally competitive economies by betting decisively on technology. The accessibility and affordability of modern-day tech infrastructures have surpassed any rationale for stagnancy in this sector.
Nepal too stands at such a crossroads. The World Bank’s 2025 Country Economic Memorandum identifies the digital sector as one of four pillars critical to unlocking the country’s growth potential. Encouragingly, Nepal has already outperformed most of its South Asian peers in exporting digitally delivered services. Yet this success is uneven and lacks structure. The country continues to block the production and export of ICT goods, leaving a gap between digital connectivity and digital capability due to the government’s policy inconsistency. In an era defined by instant communication and digital-driven growth, failing to build sturdy AI and data science ecosystems is no longer a matter of scarce resources- it is a failure to fully use the tools that level the global playing field.
Beneath Nepal’s digital ambitions lie structural weaknesses that threaten to stall progress. The 2025 Global Innovation Index ranks Nepal 127th in human capital and research, indicating a severe shortage of specialized skills essential for an AI-driven economy. While the government has signaled intent- allocating Rs 73.50 billion to the Ministry of Communication and Information Technology in the 2024-25 budget and rolling out Digital Nepal Framework 2.0- intent alone will not suffice. The World Bank cautions that without drastic improvements in implementation and infrastructure economic growth may remain trapped below four percent. Without a more aggressive fiscal push, even existing investments risk becoming symbolic rather than transformative.
13 fresh startups in 2nd Nepal Startup Meet
The urgency to act is amplified by the rapid progress of other least developed countries that have successfully repositioned themselves through technology. Bangladesh has built a formidable ICT ecosystem, recording total export earnings of $55.56 billion in FY 2022–23, according to its Export Promotion Bureau of Bangladesh- dwarfing Nepal’s $1.21 billion in merchandise exports reported by the Observatory of Economic Complexity for 2023, according to the WorldBank & IIDS report. Vietnam offers another compelling example. Backed by consistent policy reforms, it has evolved from a labor-intensive economy into a high-tech manufacturing hub, posting a GDP growth rate of 7.1 percent in 2024, according to the Asian Development Bank and Vietnam’s General Statistics Office.
These comparisons reveal a widening digital divide. While Nepal’s ICT service exports are a bright spot, in 2022, IT service exports accounted for 1.4% of Nepal's GDP and 5.5% of the country's foreign exchange reserves. This contribution is significantly lower than that of neighboring countries; for instance, India’s ICT sector accounts for 7.4% of its GDP. The same report explains how the emerging IT hubs like Moldova and Poland see ICT sector contributions of 10.0% and 8.0% to their respective GDPs.
Meanwhile, regional competitors are embedding technology across manufacturing, agriculture, and logistics to reduce costs and increase efficiency to become globally competent. Their experience makes one lesson clear: being “newly developed” is not a barrier if a country offers scale, stability, and clarity to global tech investors.
If Nepal is serious about positioning itself as a frontier for global startups, it must move beyond broad policy aspirations and implement targeted reforms. The National AI Policy 2082 (2025) provides a useful starting point. Training 5,000 AI professionals over the next five years and establishing AI Excellence Centers in all seven provinces would not only decentralize innovation and reduce Kathmandu-centric growth but also help create a digital ecosystem. Nepal’s geography offers an underutilized advantage. High-altitude regions could host green data centers, using natural cooling to significantly lower the energy costs associated with high-performance computing.
Equally important is regulatory reform. Introducing regulatory sandboxes would allow fintech and AI startups to experiment with innovations such as digital KYC and neo-banking without being stifled by outdated compliance frameworks. Formalizing the digital workforce through proposed tax exemptions for startups, while actively attracting diaspora talent through “brain gain” initiatives, could help Nepal shift from a remittance-dependent economy to one powered by intellectual capital.
Ultimately, Nepal’s success will depend on the union of state capacity and private-sector innovation. Bridging infrastructure gaps and delivering on the promises of the 2025 AI roadmap would do more than help Nepal catch up with its neighbors- it could redefine the country as a resilient, high-value node in the global tech ecosystem. The tools for this transformation are already within reach. What remains is the juridical will and collective resolve to use them, ensuring that the idea of Nepal as a frontier of global startups becomes not just an aspiration, but a reality for the next generation.
The author is a research assistant at the Asian Institution of Diplomacy and International Affairs (AIDIA). She recently graduated from The University of Tampa with a degree in Political Science, International Relations, and Sociology.
