Digital development and e-commerce in NepalEven with the government’s adoption of an e-commerce strategy, there is a lot more to do to expand the digital market.
Trade is an engine of growth. Many countries in East Asia and in the immediate neighbourhood have transformed their economies by excelling in export-led trade. But Nepal somehow missed this opportunity. Rather, we became import-dependent. The continuous trade deficit for most of the last two decades has not only weakened competitiveness, but it has also negatively impacted industrialisation, employment generation and economic growth. The challenge for Nepal is to correct this course. The decade-long civil conflict and the subsequent prolonged transition is over. It is high time that we strengthen trade competitiveness, promote export and attempt to cut down the soaring deficit. There could be many ways for this to happen, but using the emerging instruments of e-commerce in the domestic market and for export trade could work well if used systematically, holistically, timely and in a planned manner.
The application and internalisation of e-commerce can open up new opportunities for doing business. All it takes is a mobile phone to connect consumers and producers to the market. E-commerce thus has the potential to connect Nepali micro, small and medium enterprises (MSMEs), rural women and youth entrepreneurs, traders and exporters with global value chains.
The growth and expansion of information and communication technology to rural areas have created fertile grounds for e-commerce. According to Nepal Telecom Authority, mobile phone penetration has reached 130 percent, meaning there are more mobile connections than the population itself, and 62 percent of the population is connected to the internet. Social media platforms such as Facebook and Viber are now widely used for socialisation. Not only are they used for establishing people to people contacts, but they are slowly and steadily being used to connect businesses to people or other businesses as well. The use of smartphones and different mobile apps is growing fast, mostly amongst the youth and in urban areas. Nepali youth, because of their education, and largely influenced by family members that have gone abroad for work or study, have embraced the evolving digital landscape. Since the young outnumber every other age group in Nepal, they have the potential to drive economic transformation by employing mobile technology. Both the public and private sector have to understand this emerging opportunity and tap it to build a robust and thriving national economy.
Despite the potential, Nepal is already lagging behind in localising e-commerce as a business tool compared to many Asian countries, including our immediate neighbours. However, there are private-sector providers that have been pushing digital development. Ride-sharing applications such as Tootle and Pathao; payment platforms such as eSewa, IMEpay, and Khalti; or online shopping apps and websites such as Daraz and Muncha.com have already shown that e-commerce can become an alternative for transforming domestic business. Likewise, small scale enterprises—mostly handicraft entrepreneurs—have also been marketing their products in the international market by using e-commerce channels. The challenge, however, is to cultivate such entrepreneurs and provide a level playing field for their advancement to make e-commerce a means of economic transformation.
There has been international support for countries like Nepal that need help in localising e-commerce. The World Bank Group has brought the Moonshot Africa assistance programme to the African Union with the aim of bringing digital connectivity to every individual, business and government by 2030. Nepal also adopted its Digital Nepal Framework in 2018. The framework has outlined eight domains and eighty initiatives to utilise digital development for economic growth. Likewise, the United Nations Conference on Trade and Development (UNCTAD), with the support from the Enhanced Integrated Framework of the World Trade Organisation, had carried out an assessment in 2017 on Nepal’s eTrade readiness. The readiness assessment has reviewed the existing situation and has made recommendations in seven areas, including an immediate need for an e-commerce strategy, infrastructure development, logistics facilitation, and e-commerce skill development, among others. These areas would require a huge amount of investment which the government of Nepal alone may not be able to meet. We should be able to mobilise support from multinational financial institutions such as the World Bank Group or Asian Development Bank, as well as from the international private sector.
Much to do
Even with the government’s adoption of an e-commerce strategy, there is a lot more to do in constructing the required infrastructure. Massive investment is required in upscaling and expanding mobile data and its geographic coverage. Also, for this to work, internet data has to be made affordable for all groups of society. The physical address system, which is one of the critical factors for e-commerce, is weak in Nepal. T use of postal codes, proper numbering of houses and the naming of the streets have to be improved, and should be widely used by all. The postal services, which has a nationwide network, has to be reformed.
The digital payment system is another requirement for running e-commerce effectively. It is estimated that, currently, over 85 percent of the payments for e-commerce transactions are done using the cash on delivery method. Nepal Rastra Bank and the Ministry of Information and Communication Technology has to build customer-friendly payment gateways. The availability of an easy e-payment system in export can also help promote the export sector.
E-commerce transactions require strong legal protection and regulation as well. Provisions of quality control, respect of customers rights, data privacy, return and refund systems and payment solutions all have to be regulated by law. Strong legal foundations would also help attract FDI and domestic investment in this sector.
The idea is to tap the opportunities emanating from the digital development and use them for job creation, correction of current terms of trade, and gain economic transformation and prosperity. Achieving this warrants creating a conducive environment for e-commerce in a timely and systematic manner.
Marasini is Joint Secretary at the Ministry of Industry, Commerce and Supplies.