Adjusting Pakistan’s Tech Sector Priorities

Pakistan has witnessed an almost twofold increase in IT exports in the last five years. However, sustaining this growth rate requires significant and urgent government intervention.

In a series of statements, high-ranking government officials are optimistic about the future of Pakistan’s information technology (IT) exports. Former Minister of Information Technology, Syed Aminul Haque, aimed to boost IT exports from $2.6 billion to $15 billion, and the current caretaker minister, Dr. Umar Saif, has a similar goal of reaching $10-20 billion. This optimism follows the IT sector’s impressive performance with a 30% Compound Annual Growth Rate (CAGR), showing a remarkable 178% growth over the last five years, outpacing other local industries.

The surge in IT exports, partly due to COVID-19 restrictions, led to increased online activities, growing from $1.29 billion in 2019 to $2.45 billion in 2021. However, despite ambitious targets, the sector has faced stagnation in the current fiscal year, necessitating strategic government intervention. The Ministry of IT and Telecommunications has approved a plan to achieve $10 billion in IT exports, focusing on training 200,000 professionals and enhancing co-working facilities.

To sustain growth, the government must provide policy consistency, especially in taxation, as frequent changes impact investor confidence. Additionally, addressing the challenge of retaining 100% of export proceeds and easing restrictions can further boost the industry. Flexibility in banking policies, consistent taxation, and a conducive business environment are crucial for attracting foreign investors.

Political stability is paramount for successful nation branding, attracting foreign direct investment, and fostering economic growth. The Special Investment Facilitation Council (SIFC) should prioritize creating an enabling environment for the IT sector. After establishing stability, substantial research and development (R&D) investment is necessary to diversify IT exports beyond services.

Pakistan should leverage its geopolitical ties and engage in tech-based initiatives with Western countries and China. Collaboration with the defense industry can lead to innovative products like eco-friendly electric vehicles and agricultural drones. A step-by-step approach focusing on political stability, tax reforms, and R&D investment will contribute to sustainable IT sector growth, addressing the current account deficit and shaping Pakistan’s financial future.

Pakistan’s Ambassador to the United States, Masood Khan, emphasized the rapid growth of tech entrepreneurship in Pakistan, marking the country’s entry into a new era of the tech industry. Factors contributing to this growth include a digitized economy and a new generation of professionals emerging from universities.

The government’s efforts to create an enabling environment for the tech sector have played a crucial role. Ambassador Khan highlighted the nascent tech revolution in Pakistan during a special session at the Annual OPEN Global Silicon Valley Convention. The government has established the Special Investment Facilitation Council (SIFC), prioritizing the IT sector and aiming to streamline approvals and catalyze regulatory reforms. Despite challenges, venture capital funding has surged from $10 million in 2018 to $1 billion annually, attracting global investors.

Leading venture capitalists from the US, Europe, UAE, and China are showing confidence in Pakistani tech startups. The government is facilitating businesses by introducing investor-friendly regulations, E-Wallet facilities, and unique technology zones. Ambassador Khan urged faith in Pakistan’s potential, emphasizing the country’s demographic profile with a population of 235 million, a median age of 22, and a growing middle class. He encouraged continued investment in Pakistan, positioning the IT sector as a critical driver of its success.