Artificial Intelligence in Public Services and Education
by Aadit Subedi, Ankur Guragain, & Samragyi Karki
Background and Objective
Artificial Intelligence (AI) has been the latest buzzword in the world economy. According to a report byPwC, AI couldpotentially contributeupto USD 15.7 trillion to the global economy by 2030, morethanthecombinedcurrentoutputofIndiaand China.1 The importance of AI in the global economy is only going to be amplified, a factor that will lead economies to exponential growth. While some markets and sectors are ahead of the curve, AI is still in its infancy in Nepal. While some markets and sectors are ahead of the curve, AI is still in its infancy in Nepal. If open to the adoption of AI technologiesdevelopedaroundtheworld,emerging markets like Nepal will be able to compete with more developed global peers. In many industries, the market leaders in a decade could very well be start-ups of today or even businesses that don’t yet exist. In 2022, generative AI burst into public awareness, and by 2023, it started gaining traction in the business world. Now, 2024 is poised to be a crucial year for AI's future as researchers and companies work to determine the most practical ways to weave this technological evolution into our daily lives.2
Current Landscape in Nepal
The AI wave can be seen making its way into Nepal as well. We can see private companies using and developing chatbots, natural language processing, and machine-learning algorithms. A majority of the private sector usage of AI products has been limited to chatbots, with some companies using it
for object detection/biometrics and a few in agriculture and predictive analysis/financial assessment. Moreover, Nepali universities like Kathmandu University and Tribhuvan University are buildingon the potential that AIholds with research into large-language models (LLMs) and language processing and are showing promising results.3
With the growing use of AI in Nepal, it is very importantfor thegovernmenttoregulatetheuseof AI and prevent possible harms, such as privacy violations, security risks, social manipulations, etc. With this intention, the Ministry of Communication and Information Technology (MoCIT) recently unveiled the first-ever concept note on the “Practice and Use of AI” to draft laws and policies within a few years.4 Nepal has been working to develop its IT sector for a long time, and this concept note is a step in the right direction; Nepal has yet to address and substantiate the policy dilemmasofdigitalization.Theexistingprovisionsto cater to the digital legalities in Nepal are:
• National Science, Technology, and Innovation Policy 2073 B.S. (2019 A.D.)
• Digital Nepal Framework 2073 B.S. (2019 A.D.)
• Data Act 2079 B.S. (2022 A.D)
• CommunicationTechnologyandCyberSecurity Bill 2081 B.S. (2024 A.D.)
Bridging the Digital Divide
Considering Nepal’s LDC graduation in 2026 A.D., adoptingAIintoitsprosperingITindustrycouldhelp growing economies like Nepal. According to the 2024 World Development Report (WDR), ‘The
Middle Income Trap,’ lower-middle-income countries should highly prioritize investment and infusion.5 To avoid the middle-income trap, countries should adopt technologies and knowledge from other countries and introduce them into their economy in order to reap the benefits of research and development and the time that other countries have put in to increase their productivity.6 The report outlined a 2i approach where you combine investment with the infusion of knowledge and technologies from advanced economies into the economy. This policy brief engages these suggestions to mainly explore the following objectives:
• Understanding the importance of AI in the regional context of Nepal: For a landlocked country sandwiched between two emerging economies, Nepal needs to specialize in something that transcends geo-political boundaries in order to change the fate of its economy. That ‘something’ most likely seems to be the IT sector. With USD 515 million in IT exportsin2022,whichwasa64%increasefrom 2021, Nepal is making huge strides in
technology.7 Integrating AI into this thriving sector of the country could propel its growth further in terms of productivity and value.
• Creating a conducive space for integrating AI into thematic areas of the Nepali economy: It is veryimportanttocreateasuitableenvironment for facilitating AI adoption in the economy. As about 60% of the Nepali workforce is still engaged in the agriculture sector, policies aimed at bringing them to the IT sector/ knowledge economy, investing in research and development, and drafting policies that encourage businesses/freelancers in the AI sector will help in the smooth integration of AI in the country.
Dynamic Definitions of AI Systems
The quintessential AI challenge in lawmaking is its inconsistent definition,wherelawmakers and policy experts around the world have proposed varying definitions of artificial intelligence8. This may prove difficult when defining the scope of the law. Too restrictive or too broad definitions may prove to be counterproductive
Source:OECD|Lexology|HolisticAI,AdaptedbytheAuthors
ThemajorAIdefinitionsproducedbymultiplepolicy institutions can be categorized into four
Figure 1. Areas Definitions of AI systems cover
categories.9 Output, role of humans, automation, and technology specifications are the broad themes under which AI definitions are crafted with technology specifications being the section with the most divergence 10 Adopting a more comprehensivedefinition relevant tothecontext of Nepal could include ethical considerations as the fifth category that lawmakers consider while defining AI systems where an alternative, definition could be:
AnArtificialIntelligence(AI)systemisamachinebasedsystemthat,tovaryingdegrees,perceivesits environment,learnsfromexperience,andperforms actionstoachievespecificgoals.Thisdefinition appliestoAIsystemsinvolvingcomplexdecisionmaking processes, including but not limited to machinelearningalgorithms,neuralnetworks,and other systems with significant autonomy and adaptiveness.AIsystemsgenerateoutputssuchas predictions, recommendations, or decisions that influence real or virtual environments. They are developed with considerations for ethical principles, including fairness, accountability, transparency, and the prevention of bias and discrimination.Thesesystemsshouldberegularly reviewed to ensure alignment with evolving technological standards and societal values, particularly within the context of Nepal’s developmentgoalsandthedigitaldivide.
WDR’sFirst‘I’:InvestmentinAIEducation
When tracing the roots of underdevelopment and mapping the path towards a country's development, education comes second to none. It is the fabric of development in a country. For agrarian or early industrial economies, such as Nepal, the importance of investing in education is even more pronounced. According to the World Bank report, countries that have been relatively open to economic developments abroad and have successfully instituted secondary education and
vocational training tend to perform better than those that have failed to do so.11 Similarly, to exploit the potential of being an ‘IT Hub,’ Nepal needs to focus on educating its citizens to be digitally literate. However, it needs to tackle the existing challenges first. AI can fuel this initiative by addressing the systemic challenges of the education sector in Nepal, including:
• Differences in Male and Female Literacy: The current statistics show that the national male literacy rate is 85.8% and the literacy rate of womenstands atjust 70.1%.Thisshowsthatthe women-educated ration is 14.9% less than that of men.12
• Lack of quality secondary and tertiary educational institutions: The low pass percentage in SEE examinations at just 47.86%, theexodusofalmosthalfthegrade12graduates to foreign universities, and the unchecked proliferation of universities and degreeawarding institutions that have led to course duplication, poor educational quality, and inconsistent academic schedules shows the lack of quality in secondary and tertiary educational institutions.13
• Shortage of Teachers in the rural areas of the country: There is a critical shortage of over 65,000 teachers to maintain national studentteacherratiosand12.6%permanentpositionsof teachers are filled by temporary teachers, indicating a significant vacancy rate.14
• Insufficient Funding: 10.95% of the total budget for FY 2024/25 has been allocated to the Education Ministry of which only 0.4% is allocated for new programs.15
Countries havebeen makingsubstantial progress in the field of technology, particularly in education. The growth of Ed-tech platforms throughout the world is a prime testament to it. Platforms like Duolingo (language learning app), BYJU’s (education program platform), and countless other platforms have been making millions and billions in revenue. The infusion of AI in such platforms has further
fueled the digital dissemination of education. Artificial intelligence (AI) holds significant potential for transforming higher education, addressing challenges like disengaged students and high dropout rates. By leveraging AI and big data, personalized learning experiences can be created, tailoringeducation to individual student needs.This approach can enhance motivation, reduce dropout rates, and enable teachers to better understand andaddressstudents'learningchallenges.Ithasthe potential to make progress in Nepal's education sector by addressing its problems. First, it can
tackle the issue of teacher shortages in rural areas. Installing robust technology and incorporating AI in rural areas can create customized, tailored virtual learning environments that reduce administrative costs to the state and increase accessibility and equity in education. With the increase in the adoption of mobile phones and access to the internet in rural areas, personalized education at people’s fingertips can help fight gender differences in literacy rates, lower school attendance, and the differences in quality of education in rural and urban areas.
Squirrel AI and China's AI-Powered Learning Transformation
The Chinese government has integrated AI into its national education strategy, promoting the use of AIpowered platforms like Squirrel AI.16 The platform provides personalized tutoring and adaptive learning experiences to students across the country. It adapts to individual learning paces and styles by offering customizedcontentandassessments.SquirrelAIrepresentsasignificantshiftineducationbyleveraging AI for personalized learning, with a strong focus on improving students’ performance in standardized tests. Founded in China, the company has rapidly expanded, opening thousands of learning centers acrossthecountryandamassingalargestudentbase.Itsapproachinvolvesbreakingdownsubjectsinto granular knowledge points and using machine learning to tailor educational experiences to individual students. This system has shown promising results, as evidenced by student testimonials and selffunded studies, which claim that AI can often outperform traditional teaching methods in certain contexts. Squirrel AI has been particularly successful in improving student performance in subjects like mathematics by identifying knowledge gaps and offering targeted support. It operates over 2,000 learning centers across China and has been recognized for its ability to scale personalized education. Millionsofstudents,particularlyinruralandunderservedareas,havebenefited fromAI-driven education, narrowing the education quality gap between urban and rural schools.
WDR’s Second ‘I’: Infusion of AI in Public Services
Whileeconomicsuccessinlower-incomecountries hinges on accelerating investment, continued progress in middle-income economies depends on integrating and diffusing new ideas from abroad, ensuringaccessandbenefitsforallsegmentsofthe population - this process is known as infusion.17 To fully leverage these new technologies, firms require a workforce equipped with the correct technical skills, backed with strong secondary education and vocational training programs. Digital technologies,
such as the internet and mobile systems, play a key role in enhancing such productivity, promoting talent development, and assisting social mobility. The example of India’s Aadhaar system, which has turned digital footprints into valuable digital capital, demonstrateshowDigitalPublicInfrastructure(DPI) can foster entrepreneurship and economic growth. Byprovidingauniquedigitalidentitytooverabillion people, Aadhaar has facilitated access to banking, government subsidies, and other services, transforming the way individuals engage with the
economy. In Nepal, the integration of artificial intelligence into DPI can further enhance public service delivery and support e-governance, driving a more inclusive development and redefining the country’s digital ecosystem.
Within Nepal, AI is important in its DPI to facilitate continuous evolution in real-time and to foster innovation.18 A fusion of AI and DPIs can be used to automate routine government services, such as processing applications for licenses, permits, or social welfare programs. This can reduce processing time, minimize human errors, and make services more accessible to the public. A broad strategy could involve integrating AI across layers of e-governance to streamline processes in public administration and to enhance decision-making. Simultaneously, AI inclusion should be kept as a top priority, backed by strong digital literacy programs and the creation of AI tools that specialize in local languages.
Source:Authors’visualization
Furthermore, open-source software, AI models, standards, or contents that are publicly available should be replicated, modified, and shared freely. This encourages innovation and scalability in DPI by promoting the entry of private players in the
technology industry. Open-source AI frameworks such as TensorFlow and PyTorch developed by Google and Facebook respectively have been used extensively in research and industry for developing machine learning models, natural language processing,andcomputer vision.19 WithTensorFlow, developers can build custom plagiarism detection tools tailored to specific needs such as detecting AI-generated text or checking content for originality.20 Likewise, Nepal could have its own open-source AI/plagiarism detection software that not only enhances the education sector but also allows for the democratization of technology.
Nepal needs an AI policy for Digital Public Infrastructure that incorporates legal frameworks, institutional arrangements, and governance guidelines to foster a supportive environment for AI integration. This policy could either be part of a broader Digital Transformation Policy or function as a standalone framework. With an internet penetration of just 51.6%, Nepal desperately needs toexpanditsinternetinfrastructureforthesuccess ofe-governanceinitiatives.21 Additionally,creatinga central AI innovation hub within the government wouldhelppoolresourcesandsupportAIinitiatives across various ministries, ensuring a cohesive and coordinatedapproachtoAIdevelopmentwithinthe DPI. With AI-powered OCR technologies, Robotic Process Automation, and Natural Language Processing, AI can automate the processing of documents and applications, reducing manual work and speeding up administrative tasks such as permit approvals and license renewals.22 Real Time Progress Tracking and Predictive Analytics can be used to streamline workflow management, optimizing task assignments and tracking progress to ensure the timely completion of government processes. There can be AI-powered chatbots and virtual assistants that provide citizens with roundthe-clock access to government services,
Figure 2. Elements of AI in public services
regardless of location, reducing the digital divide within the nation. It can support multiple languages, enabling broader access to services for diverse populations,especiallyforamultilingualcountrylike Nepal.
Furthermore, incorporating AI into Nepal’s Smart City Initiatives would significantly boost urban efficiency and sustainability by leveraging advanced digital tools and ICT systems to better integrateandmanagecitycomponents.23 Inasmart city, AI can play a critical role in enhancing Internet
of Things (IoT) applications, where it would analyze vast amounts of data generated by sensors and connected devices throughout the city. This would allow for real-time identification of patterns, predictivemaintenance,andoverallimprovementin data quality and decision-making processes. Such smart city projects, that utilize data-driven insights generated by AI, can optimize resource management, attract investments, and improve publicservices,leadingtobetteroutcomesinurban planning and development.
Digitizing Identification: India’s Aadhaar System
In 2009, when Aadhaar was first conceptualized, it was estimated that approximately 400 million people in India lacked individual identity documents, and only 17% of the population had bank accounts.24 The GovernmentofIndiaearmarkedINR1billion(NPR1.59billion)tokickstartaUniqueIdentificationDatabase Authority of India (UIDAI) in 2012 to issue unique identification numbers, named “Aadhaar”, to ensure that individuals are accurately identified in transactions by collecting their basic personal information and verifying it through unique identifiers like biometrics and ID.25 As of September 29, 2023, it has documented the identities of 1.4 billion residents of India.26 It also gives direct access to government subsidiessuchasrations,socialpensions,cookinggas,andfertilizers,theabilitytoaccessformalfinancial sectors like bank accounts, and a way to prove their existence to access fundamental rights like voting, free education, and jobs. Furthermore, it allows for the smooth streamlining of the process of delivering social welfare services across the country. The establishment of the Aadhaar System has significantly reduced the costs for the Indian Government with an estimated reduction of USD 10 billion (NPR 1.34 trillion) every year according to the Digital Dividend Report prepared by the World Bank.27
Risks Associated with AI Implementation Over-relianceonAIsystemsintroduceseveralrisks, including severe accidents and misuse despite rigorous testing and safety measures.28 AI technologies are still vulnerable to errors and malfunctions,andtheirmisuse whetherintentional oraccidental canleadtosignificantissuessuchas privacy breaches and social manipulation. This risk landscape contributes to the extreme volatility in the AI stock market, driven by fluctuating investor sentimentandfearsofanAIbubble,akintothedotcom crash. For example, Nvidia’s stock experienced a 20% decline, reflecting concerns about overvaluation and market instability related to AI.29
Furthermore, AI is susceptible to AI hallucinations that occur when generative AI models produce false, misleading, or illogical information while presenting it as a fact.30 These errors arise due to limitations in training data, biases, or the inherent design of large language models, which generate text based on probability rather than understanding. Commonly seen in text generators and image recognition systems, hallucinations can result in inaccuracies, fabricated content, and harmful misinformation. The problem is exacerbated by the confident, yet incorrect, presentation of these outputs. To mitigate AI hallucinations, it's crucial to use diverse and representative training data, ground models with
relevant information, and regularly verify AIgenerated content.
AI also brings significant ethical concerns, primarily centered around bias. Bias in AI can occur when algorithms generate skewed results due to flawed data or development processes, leading to unfair outcomes.31 For instance, biased recruiting tools and discriminatory facial recognition systems illustrate how AI can perpetuate existing societal prejudices. Ethical issues also encompass privacy concerns, as AI's data processing capabilities can jeopardize personal information, and transparency, since many AI systems operate as opaque "black boxes," complicating accountability. Addressing these issues requires robust AI governance, diverse development teams, balanced data sets, and a regular auditing system to ensure fairness and ethical correctness.
Outlook
Injecting AI systems in the Nepali context starting with Education and Public Services is crucial for a robust base for AI innovations within the Nepali economy. This requires two things, a clear actionable strategy and collaborative governance. In Nepal, the absence of customs and precedents to base AI laws makes way for the supreme legislation route to develop rules relating to AI. Learning from Findland, Aparliamentarycommittee for the future can be established to deal with technological innovations, especially as we enter the 4th industrial revolution driven by AI.32 This committee will serve as a think-tank for parliamentary issues, with a focus on science and technology. This committee can include the following bodies under their jurisdiction:
• Ministry of Education, Health, and Information Technology
• Ministry of Communications and Information Technology
• Ministry of Physical infrastructural development
• Ministry of Finance
While addressing the widening digital divide, this committee will ensure specialized attention to R&D initiatives while helping to invest in the tech industry In Nepal, the closest alternative present to a parliamentary committee for the future is a development and technology committee within the House of Representatives. This committee’s work has been broadly focused on road and infrastructural development as of August 2024. A committee for the future is not only symbolic to concretize the visionary Nepal we are striving for, but also to establish a dedicated body within our law-making entity to ensure the investment in and infusion of AI in the Nepali economy. The establishmentofaParliamentaryCommitteeforthe Future would engage with ministries, private technology companies, international partners, and civil society. This multi-stakeholder approach will ensure that AI policies are not only top-down but also embrace grassroots innovation. Additionally, this can be pivotal in setting long-term goals aligned with Nepal’s development aspirations, including smart cities and e-governance. In Nepal, a robust governance framework that balances AI adoption with the mitigation of risks such as biases and ethical concerns while ensuring responsible and effective AI integration is needed to build education and public services as two emerging pillars for the 4th Industrial revolution that AI is bringing.
References
1 Dr. Anand S. Rao and Gerard Verweij, “Sizing the Prize,” Pwc,month date, year. https://www.pwc.com/gx/en/issues/analytics/assets/pwc-ai-analysis-sizing-the-prize-report.pdf
2 Dave Bergmann, “The most important AI trends in 2024,” IBM,February 2024
3 Nepal Government, “Concept Note: Uses and Practices of AI,” MinistryofCommunicationandInformation Technology,July 2024
4 National News Service, “Concept Paper on AI prepared for first time in Nepal,” TheHimalayanTimes,July 3, 2024. https://thehimalayantimes.com/science-and-tech/concept-paper-on-ai-prepared-for-firsttime-in-nepal
5 “The Middle Income Trap,” TheWorldBank,Month 2024, https://openknowledge.worldbank.org/server/api/core/bitstreams/8f49fae8-ba60-45ba-b4d982bc22a964d9/content
6 Ibid.
7 “Unleashing IT: Advancing Nepal’s Digital Economy,” InstituteforIntegratedDevelopmentStudies,July 2023, https://iids.org.np/images/publications/15c4487b777dcf3239cd6af6dd15c2c1.pdf
8 Sookman, Barry B, “Exploring the Definitions of AI for Legal Purposes.” Lexology2024. https://www.lexology.com/library/detail.aspx?g=c8036129-62d4-4098-bd25-1e6af3c0face
9 “Lost in Transl(A)t(I)on: Differing Definitions of AI [Updated].” HolisticAI,2024. https://www.holisticai.com/blog/ai-definition-comparison ; Grobelnik, Marko, Karine Perset, and Stuart Russell, “What is AI? Can you make a clear distinction between AI and non-AI systems?” OECDAIPolicy Observatory , 2024. https://oecd.ai/en/wonk/definition
10 Ibid
11 “The Middle Income Trap,” TheWorldBank,Month 2024, https://openknowledge.worldbank.org/server/api/core/bitstreams/8f49fae8-ba60-45ba-b4d982bc22a964d9/content
12 “Nepal Living Standards Survey IV 2022-23,” Government of Nepal, February 16, 2024. https://nepalindata.com/resource/NEPAL-LIVING-STANDARDS-SURVEY-IV-2022-23/
13 “NEB Announces SEE Results,” myRepublica , June 27, 2024. https://myrepublica.nagariknetwork.com/news/neb-announces-see-2024-results-47-86-percent-pass186-students-achieve-4-gpa.
14 “Addressing The Teacher Shortage Crisis in Nepal: A Call For Action,” GoPublicFundEducation,June 26, 2024. https://www.ei-ie.org/en/item/28758:addressing-the-teacher-shortage-crisis-in-nepal-a-call-foraction
15 Rastriya Samachar Samiti “No New Programmes in Budget as Huge Amount in Education is Compulsory Liability,” NepalNews , June 23, 2024. https://www.nepalnews.com/s/business/no-new-programmes-inbudget-as-huge-amount-in-education-is-compulsory-liability
16 Yi Wu, “China’s Education Sector: Latest Trends and Policies,” ChinaBriefing,February 2024, https://www.china-briefing.com/news/chinas-education-sector-latest-trends-and-policies
17 “The Middle Income Trap,” TheWorldBank,Month 2024, https://openknowledge.worldbank.org/server/api/core/bitstreams/8f49fae8-ba60-45ba-b4d982bc22a964d9/content.
18 Mukherjee, Pradipta, “India to Leverage AI for Making Digital Public Infrastructure More Efficient.” CoinGeek . July 20, 2024. https://coingeek.com/india-to-leverage-ai-for-making-digital-publicinfrastructure-more-efficient
19 “Pytorch vs. Tensorflow: Deep Learning Frameworks,” BuiltIn , 2021. https://builtin.com/datascience/pytorch-vs-tensorflow
20 Ibid
21 Simone Kemp, “Digital 2023: Nepal” Data Portal. February 13, 2023. https://datareportal.com/reports/digital-2023-nepal
22 “Text Analytics & NLP in Robotic Process Automation.” Lexalytics,November 22, 2019.
Published by Nepal Economic Forum, September 2024
https://www.lexalytics.com/blog/text-analytics-nlp-rpa-use-cases/.
23 Syed Asad Abbas Bokhari and Seunghwan Myeong, “The Influence of Artificial Intelligence on EGovernance and Cybersecurity in Smart Cities: A Stakeholder’s Perspective.” IEEEAccess, January, 2023. http://dx.doi.org/10.1109/ACCESS.2023.3293480
24 Nandan Nikelani, “India’s Aadhaar System: Bringing E-Government to Life”, ChandlerInstitute,n.d. https://www.chandlerinstitute.org/governancematters/indias-aadhaar-system-bringing-e-governmentto-life
25 Ibid
26 “Aadhaar Dashboard.” GovernmentofIndia,n.d. https://uidai.gov.in/aadhaar_dashboard/
27 Nandan Nikelani, “India’s Aadhaar System: Bringing E-Government to Life”, ChandlerInstitute,n.d. https://www.chandlerinstitute.org/governancematters/indias-aadhaar-system-bringing-e-governmentto-life
28 “Is the AI Bubble about to Burst as Market Volatility Grows?” ThePinnacleGazette . 2024. https://evrimagaci.org/tpg/is-the-ai-bubble-about-to-burst-as-market-volatility-grows-14746.
29 Ibid
30 Ellen Glover, “What are AI Hallucinations?” Builtin.March 14, 2024. https://builtin.com/artificialintelligence/ai-hallucination
31 Sutaria, Niral. 2022. “Bias and Ethical Concerns in Machine Learning.” ISACA . August 29, 2022. https://www.isaca.org/resources/isaca-journal/issues/2022/volume-4/bias-and-ethical-concerns-inmachine-learning.
32 “Committee for the Future,” ParliamentofFinland , Accessed on September 26, 2024. https://www.eduskunta.fi/EN/valiokunnat/tulevaisuusvaliokunta/Pages/default.aspx
Published by Nepal Economic Forum, September 2024
