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Ministry of Commerce And Supplies - Enhanced Integrated ...

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N T I S201015. IT AND BPO SERVICESStrengths Low labour costs Steady improvement in human resources andcommunication infrastructure Less affected by political disturbances, strikes,bandhas, etc. compared to other sectors Reduced income tax for IT services (20 per centinstead <strong>of</strong> 25 per cent) Located between two large outsourcing markets, viz.India and China Skilled and qualified manpower Pr<strong>of</strong>iciency in English (call centres)Opportunities Global IT/BPO market is growing fast Opportunity to enter Indian and Chinese marketsbecause <strong>of</strong> Nepal’s location advantage and knowledge<strong>of</strong> languages (Hindi, English for Indian market) Opportunity for learning from joint venture partners(exposure in production, sales, and management)WeaknessesLimited and expensive bandwidth (five times moreexpensive than in India) due to lack <strong>of</strong> competitionPoor infrastructure, i.e. electricity supply, availability<strong>of</strong> fuel for generatorsCumbersome VAT refund processNo facilitating regulation for outsourcing and callcentres as export-based industryLack <strong>of</strong> data on the sectorLack <strong>of</strong> double taxation agreements with exportingcountriesThreatsPolitical instability and security challengesBrain drain <strong>of</strong> skilled peopleActions Create conditions for a truly competitive telecommunications market. (The absence <strong>of</strong> a clearregulatory environment is an issue. The overlapping mandates <strong>of</strong> the <strong>Ministry</strong> <strong>of</strong> Informationand Communications and the <strong>Ministry</strong> <strong>of</strong> Science and Technology are a problem.) Create a larger IT park with good infrastructural facilities (electricity and telecom in particular)and attractive to private investors. (The IT park outside Kathmandu is too small and canaccommodate only up to 300 people.) Review tax structure and fiscal incentives for the sector. Reduce taxes on IT equipment (hardware and s<strong>of</strong>tware) and facilitate VAT refund. Amend foreign exchange restrictions (The limit <strong>of</strong> US$2,000 per person going abroad is ahindrance to proper development <strong>of</strong> overseas business opportunities.) Collect data on the sector, e.g. through an extensive survey <strong>of</strong> IT/BPO companies with regularfollow-up. Regularly monitor export values to increase public awareness <strong>of</strong> the economicimportance and dynamism <strong>of</strong> the sector. Identify bottlenecks and possible government/donor interventions and strategies. Promote Nepal in India and elsewhere as an <strong>of</strong>fshore destination for IT and BPO services. Encourage CMMI certification <strong>of</strong> enterprises in the sector. (CMMI is the internationalbenchmark for quality and delivery. Only one Nepalese firm is currently certified.)286NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT

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