Technology is the key growth driver and the 21st century is the century of the tech entrepreneur. That has been dubbed by analysts as the age of information and technology, where the concept of “global village” has been transformed into the idea of a “global tech-city”. This age has seen an expansion of the employment pool for companies across the globe, with outsourcing of tasks becoming an increasingly popular way to maintain competitiveness in global markets. In recent years, this decentralized labor market has flowed rapidly into Asia. For a country struggling with economic problems, this development is a God-sent opportunity for us to use its youth bulge as a dividend, for economic prosperity.
Pakistan has significant potential in e-commerce and freelancing due to its large population, a young and tech-savvy workforce and growing internet penetration. With its 200 million people, Pakistan has the fifth largest youth population in the world in absolute terms. The country has a thriving e-commerce market with an estimated value of $1.8 billion by 2021. Being one of the largest freelance markets in the world, it has over two million registered freelancers, placing it third on the Oxford Online Labor Index.
what we have
Beyond demographic indicators, digital consumption is increasing, driven by an improvement in connectivity. According to the Pakistan Telecommunication Authority, local telecommunications have 195 million subscribers, of which nearly 58% have access to 3G/4G services. Moreover, reports from the Higher Education Commission (HEC) highlight that the country has over 300 thousand active information and communication technology engineers, of which 20 thousand graduate every year. The statistics prove that Pakistan has the right inherent drivers to tap into the freelance landscape and house high-value startups. What it needs is a compelling roadmap and dedicated efforts to realize its full potential. A good plan to emulate in this regard is available right next door in Bangalore, India.
The boom in Bangalore
This city of almost 12 million inhabitants has been dubbed by many the “Silicon Valley of the East”, a title that is well deserved. Bangalore has a share of 36% of the total Indian information technology exports of $160 billion, which is calculated at $58 billion. In comparison, Pakistan’s total exports in the fiscal year 2021/22 were $31.5 billion, of which IT exports were only $2.6 billion. With each passing year, Bangalore is becoming more attractive for international technology investment, while a number of Fortune 500 companies already have their development centers and research facilities there. While Pakistan, despite having the right inherent catalysts for a boom in the IT sector, is still unable to effectively tap into its full potential.
What should we do
A dispassionate analysis of the Bangalore model reveals a few gaps in the Pakistani IT landscape that need to be closed to establish a strong startup ecosystem in the country. To this end, Pakistan must follow a three-pronged approach that focuses on designing enabling policies, making project finance available and investing in human resource development. More importantly, what is required is policy continuity and commitment to the cause of pushing Pakistan towards a strong IT economy. Let us discuss these suggestions in detail.
Over the years, Pakistan has struggled to create an enabling environment for businesses and investors. Although there has been some improvement in recent years, Pakistan still ranks 108 out of 190 countries in the World Bank’s “Ease of Doing Business” index. A deeper look at Pakistan’s profile reveals that it ranks lowest among the indicators most relevant to entrepreneurs, which include “Starting a Business”, “Paying Taxing” and “Enforcement Contracts”. To start a corporate index, the main problem is the red tapism prevalent in the functioning of our government. To this end, the government has taken steps like integration of e-services with the Federal Board of Revenue and creation of business registration portals. However, work needs to be done to ensure the availability of staff and further improve the facilitation infrastructure.
Our systems must shape up
Being able to enforce contracts is critical for investors and startups alike, but the delays in Pakistan’s legal system, which already has a backlog of nearly 2.1 million cases, are deeply discouraging. Judicial sector reforms, especially creation of more e-courts for timely disposal of cases, are key to boosting investor confidence. Finally, there is a need to simplify tax laws in Pakistan to make them easily understandable to the public. Likewise, tax registration and payment processes must be made easier by introducing online payment portals with digital payment options and improving already introduced applications. A dedicated helpline for this purpose can also help improve the process of paying taxes by resolving any issues that may arise. This is essential to set up an enabling ecosystem for startups to take root.
Creating a startup culture
For a startup to flourish, it is important that there are ample investment opportunities available. Unfortunately, in Pakistan, local funding organizations and individuals are more likely to fund established and traditional companies rather than startups. There is a need to change these attitudes by informing people about the potential of the IT sector and giving space to startups to market their products. To this end, the Ministry of Information Technology and Telecommunications can play a role in organizing various IT-related fairs both inside and outside the country to strengthen funding opportunities for startups.
A flow of funds
The government should also work to improve access to formal financial services and provide business-friendly loans to strengthen the financing landscape in the country. A strong funding outlook contributes to the pursuit of a well-founded startup ecosystem.
Cultivating a talent pool
As a final piece in the puzzle of a thriving IT sector, the government must invest in cultivating local talent. Pakistan produces nearly 300,000 university graduates from its nearly 190 HEC-recognized universities every year. Despite this, the talent pool in the country remains limited – mainly due to the mismatch between academia and industry and the problem of brain drain.
Despite having a large pool of candidates, Pakistan therefore ranks 109 out of 119 countries on the Talent Competitiveness Index. Therefore, there is an urgent need to invest in and develop talent to drive innovation in the IT sector. To this end, both academia and government have a crucial role to play.
Fostering entrepreneurial talent for startups through university networks is a globally recognized practice. Universities with in-house research facilities and relevant curriculum not only serve to nurture the skills of the followers but also develop a start-up culture which is essential to promote the cause of entrepreneurial activity in the country. Therefore, they act as spaces to not only cultivate talent, but also to create an environment suitable for translating this talent into practical results.
In Pakistan, various private sector universities like LUMS, NUST, GIKI have taken the lead in developing such innovation habitats. Many of these universities have set up incubation centers that act as a bridge between entrepreneurs, innovators and investors. These small innovation centers have been instrumental in inculcating a spirit of entrepreneurship among their degree holders. Unfortunately, government universities, which produce the most graduates in Pakistan, are still lagging behind in this regard. With outdated resources and almost no investment in research and development, these universities remain devoid of a startup ecosystem. Consequently, the overall impact of these private sector initiatives remains limited and small. Therefore, there is a need to invest in upgrading public universities’ potential for research and development.
Another viable means of working towards human resource development is through vocational training programmes. Teaching digital skills to the younger population can help improve their technical skills. For this purpose, the government can partner with vocational training centers and global institutions like Google, Microsoft etc. It can also partner with the private sector to establish programming boot camps to impart various skills among the younger population. Such initiatives can not only upskill the workforce, but also give rise to the freelance culture, which directly contributes to strengthening the startup ecosystem. As more people become involved and experienced in freelance work, they not only become income-generating by tapping into the gig economy, but also cultivate experience and talent that can be leveraged by local startups. There are various examples from around the world where freelancers have joined forces to initiate successful startups.
A final ingredient in this recipe for IT progress, and perhaps the most important, is a commitment to continuity. Pakistan is currently at the crossroads of history, where it is fraught with challenges of an unprecedented nature. A nose-diving economy has added to its problems in recent months, pushing it further towards a national crisis. But genius lies in seeing opportunities in crisis. Pakistan is a densely populated country with a consumption-driven economy and the right inherent drivers to attract start-ups. It has a burgeoning middle class and a young population that is rapidly becoming digitally savvy. The country is poised to take a front-line role in the Industrial Revolution 2.0 that shows progress in the IT sector. With all the inherent drivers in place and a roadmap for progress in sight, what is required is to remain committed to taking the necessary steps to prepare Pakistan for an IT boom. The government needs to ensure continuity in its resolve to close the gaps that exist in our IT sector landscape and in its commitment to establish an enabling ecosystem for the startup culture to take root and flourish. This is Pakistan’s Silicon Valley moment and the time has now come for Pakistan to fully commit to seizing this opportunity.
Qasim Farooq is the LUMS Graduate and Information Officer at PID. All information and facts are the responsibility of the author