Despite the government opening Special Economic Zones (SEZs) to service-oriented industries, IT entrepreneurs remain reluctant to relocate, citing logistical challenges. In response, the Nepal Telecommunications Authority (NTA) has begun initial preparations to establish an IT-friendly building in Kathmandu to support the sector.

A recently introduced ordinance amending Nepal’s Special Economic Zones Act, 2073, now allows service industries to enter SEZs. While the ordinance does not explicitly specify which sectors qualify, an NTA official confirmed that the SEZ Authority has proposed IT services as the primary focus. The ordinance has been tabled in Parliament for approval.

Originally designed for export-oriented manufacturing industries, SEZs have struggled to attract industries. With Nepal exporting IT services worth Rs 72 billion in 2022 and the government targeting Rs 300 billion in IT service exports over the next decade, SEZs were opened to the sector. However, Nepal Association for Software and IT Services Companies (NAS-IT) Treasurer Abhay Poudel argues that the existing and upcoming IT firms cannot relocate immediately.

“The backbone of the IT sector is human resources, which are concentrated in Kathmandu,” Poudel said. “Instead of expecting companies to move to distant SEZs, a building of SEZ should be designated in Kathmandu.” He suggested that an IT-dedicated building accommodating 8–10 companies could mobilize about 1,500 employees, with shared facilities provided in collaboration with the government.

Currently, Nepal has only one operational SEZ in Bhairahawa, with two underdeveloped clusters in Simara. The government plans to establish SEZs in all seven provinces, including Panchkhal, Kavrepalanchok, but none exist in the Kathmandu Valley. Previous attempts to encourage IT firms to relocate to SEZs in Bhairahawa and Simara failed due to lack of infrastructure and accessibility issues.

While an IT park was established in Banepa, companies have been reluctant to move there. Poudel suggested that the government renovate existing buildings in Kathmandu or the private sector’s facilities to create an IT-friendly SEZ before expanding to other locations.

Acknowledging IT entrepreneurs’ reluctance to move, the NTA has initiated plans to construct a high-tech building in Kathmandu. An official stated that a sub-committee is being formed to identify suitable land for the project. “The plan includes a state-of-the-art building with the NTA’s central office on one floor and the remaining space allocated for IT firms,” the official said.

NTA Executive Director Chhatra Katuwal emphasized the need to include service-oriented industries in SEZs to attract foreign investment and benefit from government incentives. “We are drafting a policy to determine which service industries should be prioritized and how investment agreements will be structured,” Katuwal said.

Experts argue that IT companies do not necessarily need SEZs but require well-equipped IT parks. “Providing quality bandwidth, essential facilities, and a platform for startups would create a thriving ecosystem,” said an official from a startup and equity fund management organization. He pointed to successful IT hubs in Bangalore, Silicon Valley, and Thimphu, suggesting Kathmandu should follow suit.

For SEZs to be viable for IT companies, he added, they must offer reliable infrastructure, tax benefits, export incentives, and uninterrupted electricity and internet services.