Pakistan’s technology sector endeavors economic uncertainties

Software development and IT-enabled services (ITeS) for data centres, technical service/call centres, and telecom services make up the majority of the Pakistani ICT industry. After India, Bangladesh, and the US, Pakistan is currently the fourth largest country for freelancers, with game software development being the most popular service.

The majority of Pakistan’s ICT industry is export-focused. Over 19,000 ICT businesses are registered with the Pakistan Software Export Board (PSEB). More than 170 countries are receiving services from Pakistan’s IT and ITEnabled Services (ITeS) sectors.

The US is the largest market, accounting for 54.50 percent of Pakistan’s IT exports, followed by the UK with 7.90 percent, the UAE with 6.90 percent, Ireland with 6.70 percent, and Singapore with 4.90 percent. According to PSEB, exports of telecommunication, computer, and information services was recorded at 2.6 billion dollar during FY 2021-22, which had risen from previous figure of dollar 2.1 billion during FY 2020-21.

However, according to Finance Division’s Pakistan Economic Survey 2022-23, this figure stood at dollar 1.94 billion during FY2022-23 (Jul-Mar) which showed a decline year on year. The necessity of the ICT sector in generating Pakistan’s required foreign exchange earnings has been demonstrated in recent years.

Comparing the IT industry’s trade surplus to that of the rest of the services sector with exports to 170 countries, Pakistan’s IT industry is the largest net services exporter. This industry can help the country break free from the Balance of Payments (BoP) crises, provided a conducive, convenient and efficient ecosystem is in place at the earliest.

The formation of STZs is part of the government’s larger objective of transforming the country into a knowledge-based economy and increasing its worldwide competitiveness in the technology sector. STZs are designated locations in Pakistan that aim to encourage and support technology-based industries and innovation.

For smooth operationalization of the STZs, a special authority called the Special Technology Zones Authority (STZA), which derived its mandate from an act of parliament, namely the Special Technology Zones Authority Act 2021, was formed by government of Pakistan. There are currently 115 clusters based on this concept of STZs in the US, 169 in China, 63 in the UK, 23 in Iran, 7 in India, 5 in Malaysia, and 3 in Egypt.

There are currently 9 announced technology zones in Pakistan in all provinces including the Islamabad Technopolis, which are envisioned to unlock new technology sectors beyond IT/ITeS, such as AgriTech, Aerospace and Defence, Gaming, Deep Tech, Maritime Tech, Advanced Engineering, AI and Machine Learning.

Around 400 companies are currently registered in the Special Technology Zones Authority (STZA), out of which, 63 percent are Pakistani, while the rest belong to China, the US, Turkey and other countries. Recently, with focus on IT industry, it has become a prioritized domain at federal and provincial levels. However, there are few issues being faced by local and international companies to do business in Pakistan.

These include complex official processes, lack of inter departmental coordination and lengthy approval procedures causing investor trust deficit. Presently, the public sector entities are operating in scattered bodies catering for science, technology, engineering and innovation.

While a “single window” operation under Pakistan Customs is on its way to foster a business-friendly environment across the borders, tech industry should also be linked to this mode of operation for ease for investors and start-ups to operate in Pakistan.

The actualization of the ‘Digital One Window’ program by STZA, scheduled for October 2023, will reduce the processing time for applications, aligning them with global best practices, if implemented in true letter and spirit.

The recent efforts of government to speed up the STZA collaboration with the relevant departments in order to facilitate technology industry growth is also encouraging. Establishment of National Aerospace Science and Technology Park (NASTP) is a step towards gaining momentum in this regard. Several Memoranda of Understanding (MoUs) with both international and domestic partners have been signed by STZA both on the national and international levels.

These partnerships span a wide spectrum of ecosystem requirements, encompassing regulatory compliance, policy formulation, infrastructure development, venture capital investment, cashless transaction zones, advancements in web 3.0 technologies, semiconductor innovation, and the facilitation of high-level executive training and education programs for technology leaders in Pakistan.

In short, Pakistan’s technology sector endeavours spearheaded by STZA should be pursued vigorously and shielded from political or economic uncertainties, given their potential to drive the country’s economic development through the creation of a new export-oriented engine.

While there have been commendable developments in recent months, there remains room for enhancing the efficiency of policies and practices.

To achieve this, learning and drawing insights from well-established tech zones in countries like China and US having tech exports worth 67.1 billion and 33.6 billion till 2023 July respectively and Iran, having national digital economy worth 45bn dollar till March 2021 is imperative.