In line with the global trend, the gig economy is growing rapidly in Nepal as many workers are drawn to the allures of flexible schedules and autonomy to work. However, the government fails to catch the pace of the growth of the gig economy driven by technological advancement.
--BY NEWBIZ TEAM
After being unable to secure a job at a banking institution, Nirmal Shrestha, 31, turned to his two-wheeler to make a living. Facing financial pressure to complete his Master's degree at Shankar Dev Campus, he began working as a rider for the newly established ride-sharing start-up Pathao. It's been almost four years since he joined Pathao, but he still holds onto the hope of someday working in a bank. However, he states that he wouldn't be concerned if that opportunity doesn't come.
"I earn as much as I would have as a bank salary through my work as a Pathao rider," says Shrestha. "This job offers me flexibility, allowing me to work when I want or take time off if needed," he adds.
Shrestha is one of the thousands of Pathao riders who have contributed to the company's growth and its position as a part of Nepal's gig economy.
The gig economy, also known as the sharing economy, refers to the labour market characterised by the prevalence of short-term contracts or freelance work rather than permanent jobs. Although the exact size of the gig economy is not known, it has been growing in recent years due to the growing availability of internet access and advancements in technology that connect workers with clients.
The growth of ride-sharing and task-oriented service platforms is a reflection of the rise of the gig economy. In recent years, knowledge-intensive and creative occupations have also emerged as a fast-growing segment of the gig economy. Technology has played a crucial role in the adoption of the sharing economy. As internet penetration and connectivity continue to increase, it's becoming easier for independent workers in Nepal to connect to the marketplace and offer their services on their convenience and time.
A study conducted in 2021 by the Oxford Internet Institute and the University of Turku estimated that there are at least 351 online gig platforms with over 163 million freelancers registered globally. According to a survey by Mastercard, the global gig economy was valued at $204 billion in 2018 and is projected to reach $455 billion by 2023.
The gig economy has become a source of decent work for many Nepalis and has helped address unemployment to some extent. With a growing population of 26.5 million and a large portion of the population under 30 years old, youth unemployment remains a problem in Nepal. Youth unemployment (aged 15-29) in Nepal is 19.2%, compared to 2.7% for the overall population, data shows. An estimated 400,000 young people enter the workforce every year.
However, the country has not been able to create enough jobs that can absorb all job seekers. This mismatch has forced many to seek employment abroad. It is estimated that over three million Nepalis work abroad. Back home, the majority of employment opportunities are created by the private sector, while the public or government jobs are limited and highly competitive.
Economists say that the country should leverage its gig workforce that has the potential to become a good source of foreign currency earnings. “We should formalise and promote the gig economy. Those providing their services to foreign firms, particularly in the IT sector, are bringing foreign currency into the country,” says Dr Swarnim Waglé, an economist.
“Gig economy offers us a huge opportunity. There is a huge demand of this community in the technology sector even within the country,” adds Waglé, who is also the Chair of the Institute for Integrated Development Studies (IIDS) - a South Asian policy think-tank.
The COVID-19 outbreak in 2019 led to lockdowns and containment measures around the world, resulting in widespread job loss and economic slowdown. At the same time, the pandemic accelerated digital adoption among people, causing businesses to shift towards digital business models.
The pandemic forced many labour-intensive businesses, such as manufacturing industries, to reduce their workforce or close completely. With the closure of shops and physical outlets, people had fewer options to get their day to day needs. This resulted in a surge in the demand for services that can be delivered at home such as food delivery and online shopping. Ecommerce platforms like Daraz and Sastodeal as well as food delivery service provider Foodmandu all observed a sharp rise in demand. The government also encouraged the use of these on-demand services during the pandemic.
The growth in the use of online services increased the demands of workers to provide various types of services on call. Be it for plumbing or delivery or cleaning, there was a rise in the demand of gig workers. There was also a shift in the workforce. As companies and businesses suffered losses due to the slowdown during the pandemic, they laid off workers or employees in a huge number. Many people who lost their jobs due to the pandemic turned to gig work as a source of income during the pandemic.
According to economists, the gig economy has been a lifesaver for many people who lost their jobs during the pandemic. The pandemic also prompted many to realise that relying on a single source of income can be risky and that they could lose their job at any time. Companies that cut jobs during the pandemic were not in a position to immediately bring back high-paying full-time employees or fill vacancies until they see a rebound in their businesses. Instead, they could turn to employing contractors or freelancers, boosting demand for gig workers.
Shristi Saakhwa, a social media manager, took an online course on social media marketing after losing the job of marketing officer of a manufacturing company during the pandemic. Immediately after the training, she was able to bag a contract work on social media marketing of an Indian tech company through Upwork. Upwork is a platform that connects businesses with independent professionals and agencies around the globe. Saakhwa says that she is now happy with the earnings she has been making from the remote work and that she is not in a rush to return to the traditional job.
“One thing that I learned during the pandemic is that you could be fired anytime if your employer is in crisis. You cannot expect the government to come to your help,” she says. “But it’s not the end of the world. If you have the right skill or idea to find work, you can find and accept as much work as you can. These works could be just a few clicks away,” she says.
Empowered by technology
Technology and digitization are the primary drivers of the gig economy. Online platforms have been created to connect workers with customers. This has made it easier for gig workers to find work and for customers to find the services they need.
Mobile devices and laptops have made it possible for gig workers to work from anywhere and at any time, enhancing the flexibility and convenience of gig work. Additionally, technology has facilitated communication and collaboration between gig workers and customers through the use of instant messaging, email, and project management software, thereby increasing the efficiency of the gig economy.
As internet access becomes more widespread and smartphones become more prevalent, the number of people working as freelancers or independent contractors has increased, particularly in areas such as web development, graphic design, and content creation. This has also resulted in a growth in the number of online marketplaces and platforms connecting clients with freelancers.
Digital platforms have helped to match people to gig work. Many people who have their spare apartments are now listing it on Airbnb to earn rents from vacationers. Those having a two-wheeler are becoming riders for ride sharing platforms Pathao or inDrive.
Economists predict that the appeal of the gig economy could grow even further in Nepal. Growing internet penetration is making gig work more accessible to people who were previously unable to participate or were unaware of the opportunity. The growing accessibility of the internet means that gig work can now be done from remote locations, providing opportunities even to people living in rural areas.
Like elsewhere, millennials and Generation Z will drive the growth of the gig economy in Nepal in the future. The popularity of freelancing and part-time work among the younger generation is a key factor in the potential of the gig economy.
In Nepal, gig work is mainly concentrated in the service sector, especially in areas like transportation and delivery.
Similarly, the growth of e-commerce and online delivery services has also led to an increase in the number of people working as delivery drivers or couriers. However, it's the gig work in the information technology (IT) sector that holds the most promise for Nepal. There are many Nepalis who work as coders, programmers, or website designers for foreign IT firms from the comfort of their own homes. This sector is growing and has the potential for even more growth in the future.
Whether as coders, programmers, or website designers, many Nepalis have been working for foreign IT companies from Nepal to make ends meet, increase savings, or have extra spending money. It is not only the workers who find gigging an attractive option mainly due to the independence and flexibility it offers to them while performing their assignments. It's not only the technology that is accelerating the trend, either. The demand side is also getting stronger. The proliferation of gig platforms has enabled customers or clients with tasks that need doing can easily search skills that they are looking for, without making a permanent hire.
Not only startups or small companies, larger employers and corporations are also using gig workers. They are increasingly relying on temporary hires, freelance contractors, and outsourcing for regular jobs within their companies, including roles in marketing, human resources, and procurement.
This shift is apparent in Nepal’s private sector. Business leaders say that many companies are inclined towards the idea of utilising gig workers or freelance contractors to become leaner or control their costs.
The Labour Act of Nepal allows businesses to hire employees using various modes, such as regular employment, task-based employment, casual workers, and time-bound workers including short-term and part-time workers. The act also allows for the engagement of outsourced labourers for work other than the core work of the business. The work that can be carried out by the outsourced labourers is as prescribed in the Nepal Gazette.
As the hiring and labour compliance cost is high for regular or ‘permanent’ employers, gig workforce has become a preference for them.
Source of foreign exchange
The gig economy has not only benefited individuals and firms. It has also become a source of foreign exchange earnings for Nepal. People working for foreign companies as contractors or freelancers draw their salary in foreign currency. Although there is no study or data on the foreign currency earnings made by gig workers or freelancers, some estimates suggest that the figure could be as high as $100 billion per year.
This amount is nearly equivalent to the total merchandise exports of the country. Despite years of initiatives to promote exports of various commodities by identifying them in the Nepal Trade Integration Strategy (NTIS), the total value of merchandise export touched the $ 100-billion mark only recently. However, this new sector is said to have fetched the country more. According to economists, Nepal should prioritise this new export sector which has the potential to boost the foreign exchange reserve of the country when the manufacturing sector is on a decline.
Some gig workers that New Business Age talked to say the payment system has been a hindrance to the flow of foreign currency earnings to Nepal. They suggest that the authorities should facilitate a proper payment processing system such as PayPal and Stripe, where many gig workers receive their payments. In the absence of a dependable payment system, many tech workers still have to receive their payments in their relatives' accounts and ask them to transfer it to Nepal.
IT is the tip of the iceberg. All the jobs except un/skilled manual labour is something that can or will be turned into a remote position. Many giggers who work remotely range anywhere from coders, to teachers, therapists, and consultants. If it’s a desk job, a Nepali from here can do it and earn foreign currency.
However, it's not only the inflow of foreign currency. Many domestic firms rely on contractors abroad for various services including software or other IT services, causing an outflow of the foreign currency. But, that should not be a cause for Nepal to close its door and remain isolated from what’s happening around the world.
Govt remaining aloof
While the gig economy is expanding rapidly, the government appears to have fallen behind this new shift.
The government has been trying to formalise the informal economy, with a focus on turning informal economic activities into formal ones. However, its focus on the conventional economy has left it ill-prepared to deal with the gig economy, which is largely informal. The government has neither conducted any studies or surveys on the gig economy nor has it clarified its position or policy on how it views or plans to regulate this free-market system.
Some of the recent actions or initiatives of the authorities reflect the government’s inconsistent and often confusing policy approach towards the gig economy.
The government initially attempted to ban ride-sharing platforms like Tootle and Pathao, but later allowed them to resume their services. However, there was a subsequent crackdown on riders, which led to public backlash and resulted in the authorities backing off and allowing the ride-sharing platforms to resume operations.
Kewal Prasad Bhandari, Secretary at the National Planning Commission (NPC), acknowledges that the government has not taken significant steps or approached the issue in a manner that would facilitate the growth of the gig economy in the country.
“The government is aware of this new trend. Most of these are the outcome of the innovations within and outside the country. So, they should be viewed and dealt with differently,” said Bhandari.
“However, we have not been able to take any significant steps or approach to regulate or facilitate them as the government is still stuck with conventional businesses or traditional forms of employment.”
One of the major challenges facing the gig economy is taxation. Due to the lack of clear and consistent government policies on how to handle gig workers' earnings for tax purposes, many gig workers providing services abroad are afraid to disclose their foreign currency earnings.
The government attempted to address this concern by introducing a one percent tax on foreign currency earnings made through gigging a few years ago, but this policy only applies to those providing IT-related services, such as software development, digitisation, and business process outsourcing. This tax was introduced through the fiscal year 2021/2022 budget and is expected to bring such gig workers into the tax net.
One of the expectations that many are making from the government is a liberal approach or policy to allow freelancers or gig workers to venture out, open bank accounts or even make investment in foreign firms.
In addition to simplifying the payment process, they also want the government to allow freelancers to get sweat equity. Some of the startups abroad are now offering stake to workers, known as sweat equity, in lieu of their payment for the services or contributions. However, Nepal restricts any investment or ownership in firms abroad. Gig workers, particularly in the IT sector, want the government to remove such restrictions for them.
Worker Protection, a challenge
It's not that the gig economy is always positive. It also has disadvantages. Most gig work is characterised by inadequate protections. Unlike traditional jobs, they often lack benefits such as retirement plans, insurance coverage, and participation in other protection programs. Additionally, there are fears that labour market standards are weakening.
Gig workers have limited negotiating power with employers and may struggle to assert their rights or unionise for collective bargaining. Even more precarious are protection levels for work injuries and disability.