How Nepal can benefit from the Fourth Industrial Revolution
By Dr Prativa Pandey
The advent of the fourth industrial revolution (4IR) and rapid digital transformation has the potential to bring about a major shift in emerging economies by increasing productivity and improving innovation across various sectors. The 4IR, also known as Industry 4.0, is characterised by increased technological innovations such as automation, blockchain, artificial intelligence, augmented reality, internet of things, and cloud computing. As the 4IR takes root in society, the world will experience rapid changes in work culture and greater global connectivity than ever before. To adapt and leapfrog during the 4IR, the world should prepare itself for the opportunities and risks associated with it.
While developed nations have smoothly graduated from the 1st to the 4th industrial revolution, building on their knowledge and expertise, developing countries like Nepal have struggled to catch up with the rapid industrial transformations. Nepal has long used the rhetoric ‘a yam between two boulders’ - a landlocked and geographically challenged country - to justify its slow-paced economic development. However, the 4IR, which utilises technology and promotes a knowledge economy, presents an opportunity for Nepal to become "land and cloud-linked" and leapfrog. Nepal is in a unique position, with a large population of youth (60% of the population is between 16 to 40 years old), which can be leveraged to bring about a technological revolution in the country and realise its demographic dividend.
However, technology alone is not enough to fully realise the potential of the 4IR. It is widely acknowledged that knowledge management, achieved through upskilling and reskilling the workforce, is also critical to adapting, competing, and thriving in the wake of the 4IR. Knowledge management encompasses people, processes, and technology, and becomes increasingly important with workforce fluidity due to disruptive technologies.
To reap the benefits of the 4IR, it is essential to first build a strong foundation by creating a conducive environment. For least developed countries (LDCs) like Nepal to thrive during the 4IR, they should focus on three key areas.
Fostering innovation mindset and ecosystem
The Global Innovation Index (GII) ranks world economies based on their innovation capabilities. Nepal currently ranks 111th among the 132 economies featured in the GII 2022. Studies show that a country's research and development (R&D) spending is directly proportional to its GDP. Most technologically advanced nations allocate 1.5-4% of their GDP towards R&D. Nepal's low innovation ranking and vulnerable economy are unsurprising since the country spends less than 0.3% of its budget on Science and Technology (across all sectors), and its R&D spending is around 0.02%. This lack of investment is reflective of a weak innovation culture and mindset. The government should incentivise and invest in R&D and innovation activities in academia and industry to strengthen the innovation and entrepreneurial ecosystem in Nepal, creating leapfrogging opportunities.
Countries like South Korea and Singapore have experienced rapid economic growth by investing in skilled human resource development and technology sectors such as semiconductors and electronics. However, developing new technologies while trying to catch up with front-runners in innovation is challenging for least developed countries (LDCs) due to the lack of hard and soft innovation infrastructure, technological know-how, and physical assets. For instance, advances in Information and Communication Technologies (ICT) are largely attributed to investments in broadband installations, access to electricity, and developing necessary skills. Such investments are mostly lacking in LDCs or mainly concentrated in a few major urban areas, exacerbating the digital divide within societies. Thus, each country needs its own strategic innovation policy to create a thriving innovation ecosystem. Ultimately, a country's development trajectory can only be harnessed and sustained by strengthening its innovation ecosystem that facilitates contextual adaptation of frontier technologies and gradually builds the capacity to develop these technologies further.
Transforming governance for 4IR
Governments must be proactive and agile in responding to the opportunities and challenges presented by the Fourth Industrial Revolution. The pace of change demands more flexible and adaptable laws to encourage and take advantage of innovation. This requires reimagining how policies and laws are formulated to address emerging issues related to infrastructure needs, workforce requirements, trade and investment opportunities, and data and consumer protection.
There are many examples of countries fast-tracking technological reforms to bring positive socioeconomic changes, such as using blockchain technology to improve food security and supply chains, or utilising drone technology to deliver blood and other urgent supplies in remote areas. As Nepal is scheduled to graduate from LDC status by 2026, it is crucial to prioritise and accelerate industrial and infrastructural innovation by utilising the current preferential benefits available to LDCs.
Bangladesh has successfully utilised its LDC status benefits by investing heavily in transferring technology to sectors such as pharmaceuticals and ICT. Nepal can follow this example by implementing similar strategies, innovation policies, and intellectual property protection to create a conducive environment for technological advancement of industries in Nepal, and to attract private sector and foreign direct investments.
Mobilising human resources
The rise of smart communication systems like online learning platforms, digital coursebooks, remote classrooms, internet, and global connectivity has drastically changed how and what students learn in schools. However, the digital divide due to lacking infrastructure in developing nations can create inequalities in terms of access to quality education, basic digital skills, and 21st-century skill sets necessary to participate and grow in the knowledge economy. Furthermore, rapid technological advancement has blurred the lines between various fields, making it common for people to switch careers and update their skills to adapt to the changing demands of the workforce. Nepal needs a major overhaul in its education system to cater to and adapt to the needs of the dynamic workforce.
Nepal has seen growth in the ICT outsourcing and digital payment sectors, thanks to better internet penetration and skilled human resources. However, there is still a lack of technological interventions and upskilling in other sectors, which has negatively impacted industrial productivity and competitiveness in the global market. To address this, the government should provide special support for businesses that invest in innovation and technological upgrades to increase their competitiveness in the global market, especially for exports. For example, technology transfer for manufacturing biosimilars like insulin and enzymes within the country can help Nepal become self-sufficient and reduce the trade deficit. However, outdated technology transfer policies, customs infrastructure and regulations, and bureaucratic red tape have hindered such ventures. This has resulted in many skilled Nepalese migrating to other countries in search of better economic and educational opportunities, with over 1,700 Nepalis (mostly between 25 and 35 years old) leaving the country for work every day. Nepal is losing its demographic dividend due to this brain drain. In addition, Nepal can utilise the collective knowledge and skills of its large diaspora across the world through collaborations and partnerships. Educational reforms, proper human resource management, and meaningful engagement of the diaspora can turn the tide of brain drain into brain gain and brain circulation.
The 4IR has begun to transform the way societies think and act. If the LDCs fail to keep up with these technological advancements, they risk missing out on the benefits of yet another industrial revolution. However, this time, the gap between developed and least developed nations could become even wider, exacerbating issues of inequality and exclusion. While there are many obvious benefits to the 4IR, we must remind ourselves that we are still in the midst of a technological evolution that demands shared decision-making to ensure inclusion and equality. As we navigate these uncharted territories, we must be critical of anything that poses a threat to our collective human identity and widely accepted societal ethics and norms.
(Dr Pandey is the founder and CEO of Catalyst Technology and Herveda Botanicals Pvt Ltd)