Executive Summary Nepal has immense untapped opportunities. The country aims to transition from a least developed country to a developing economy by November 2026. Despite such aspirations, Nepal’s per capita gross domestic product (GDP) remains significantly low, at US$1,208 in 2021, and poverty levels are highest among the smaller South Asian nations. While Nepal aspires to reach a per capita GDP of US$12,000 by 2043, this report presents a 10-point agenda for the country to create a development trajectory that will expand the economy by five times its present size, from US$39 billion in 2023 to US$200 billion by 2033. The 10-point agenda comprises several concrete steps: Recommendation 1: Tread the path to economic diversification through IT-enabled transformations
- Nepal needs to diversify its economy by pursuing robust developments in its IT sector to support off-farm manufacturing and domestic services.
- Nepal´s gig economy is a growing sector that should receive the necessary emphasis in the country’s development policy actions. Backed by software and technology development, the sector can account for a significant portion of online freelance employment and help formalise a large section of the unorganised workforce.
Recommendation 2: Generate value by leveraging the demographic ‘window of opportunity’
- Nepal should capitalise on the unique opportunity to harness its demographic dividend and youth capital to accelerate its economic growth and create a prosperous future for its citizens over the next 10 years.
- Addressing gender disparities in the labour market can have significant economic benefits, including boosting national income, increasing productivity, and reducing poverty.
- Measures such as improving educational and skilling opportunities, creating a safe working atmosphere, increasing the availability of workplace daycare centres, enhancing women's leadership and decision-making participation, and encouraging and supporting women´s participation in private enterprises can help correct the gender disparity.
Recommendation 3: Create workforce capabilities to respond to the evolving needs of the job market
- Nepal's economic growth can be propelled by educating and strengthening the skills base of its working-age population, especially the youth, and prioritising technical, vocational, and professional education.
- Expanding health infrastructure, investing in community-based primary healthcare units and existing networks of community health workers, and strengthening the social health security system can also improve healthcare access and quality.
Recommendation 4: Harness the true potential of natural wealth through sustainable tourism and ‘ecopreneurship’
- Nepal can take advantage of its massive natural capital by promoting sustainable tourism, which includes participatory conservation, community-led tourism, the promotion of a circular economy, and local ecotourism. This can generate important benefits such as employment creation and skill development for the youth and women, thereby helping the cause of equity and distributive justice and promoting economic growth.
- With its vast natural wealth, Nepal is an ideal location to foster environmental entrepreneurship through ecotourism, green construction, and waste management. Collaborating with the thriving startup sectors in India and Bangladesh can create opportunities to establish bridge projects in the region.
Recommendation 5: Prioritise the renewables sector for improvements in energy security and protection against global volatility
- The government can offer tax breaks and subsidies, streamline bureaucratic processes to break departmental silos and invest in developing the technical capabilities of local workers, create enabling business conditions, and encourage private sector investment in hydropower and renewables.
- Nepal must also explore exporting surplus energy to neighbouring countries and developing small- and medium-sized hydroelectric projects.
Recommendation 6: Climate-proof traditional growth drivers for food and livelihoods security
- Nepal needs to create better climate resilience through a multifaceted and integrated approach that involves government action, private sector engagement, community participation, sustainable land-use practices, climate-resilient farm infrastructure development, and strengthening institutional capacity to respond to climate risks.
- Malnutrition is also a significant public health issue in Nepal, with climate-related shocks exacerbating food insecurity and malnutrition among vulnerable communities. Possible solutions can involve the promotion of climate-smart agriculture with a gender-sensitive approach and crop diversification to promote the cultivation of more climate-resilient yet nutrition-rich varieties or species.
Recommendation 7: Improve the business environment to encourage and secure a steady inflow of foreign investments
- Nepal must establish political and governmental stability to ensure a coherent developmental policy for the economy.
- Nepal should improve access to finance by developing a robust financial sector, encouraging the use of technology in finance, and creating favourable policies that support entrepreneurship and innovation.
Recommendation 8: Promote digital financial inclusion to enhance the savings base to advance domestic private investment, and promote the gig economy and digital entrepreneurship to reduce remittance dependency
- Nepal needs to enhance its financial inclusion through digital technology, thereby increasing the formal savings base of the economy. This will help create a larger pool of “investable capital” from the domestic private sector, which will help the process of economic growth.
- Nepal must embrace digital technologies and expand its gig economy to substitute its remittance incomes. The country should invest in digital infrastructure, encourage the adoption of digital technologies, and promote digital entrepreneurship.
Recommendation 9: Promote regional cooperation and connectivity to strengthen the prospects of global economic integration
- Nepal needs to work on developing the Bangladesh-India-Nepal economic corridor. Improved connectivity through resilient infrastructure systems can reduce trade costs and increase bilateral trade and investment flows.
- To reduce external-sector dependencies and protect against the uncertainties of a volatile global economy, Nepal should assert its presence in the global export market, particularly through partnerships with larger regional actors like India. As manufacturing units shift from China to countries with lower labour costs and less stringent regulations, Nepal can become a major service provider to the new emerging manufacturing hubs in its neighbourhood by supplying critical raw materials and intermediate goods to produce sophisticated finished products.
Recommendation 10: Take advantage of the immense potential in the domestic service sector to emerge as a beneficiary of global corporations’ movements out of China
- Nepal’s demographic dividend presents an opportunity to develop its service sector through the organic movement of the labour force away from agriculture. Global corporations’ shift out of China to diversify their value chain (China+1 strategy) can help Nepal indirectly. Global corporations have learnt that an overdependence on specific economies is bound to have cascading effects on the world economy because of the macroeconomic shocks they produce. While nations like India and Vietnam are emerging as beneficiaries of this China+1 strategy, Nepal can support the growing manufacturing hubs, especially in India, by providing certain intermediate services, including that of being a trading hub, given its unique strategic location between China and India.
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