There has been a not so silent revolution in Pakistan. It is now impossible to go on any social media platform, turn on any TV channel or look at any newspaper, without the mention of one man; Umar Saif.
He has ensured that every minute detail of the ministry of science and technology’s activities is delivered to audiences instantly. The last time this ministry was relevant was when Fawad Chaudhry, then minister, had gone to war with the Ruet-e-Hilal committee. The technological breakthrough being debated at the time was whether the moon sighting for Eid was to be done using a telescope or GPS.
Needless to say we have come a long way since then. This time around, the ministry has captured everyone’s attention for something worthwhile: several initiatives that aim to transform Pakistan’s IT industry.
Umar Saif is perhaps the most proactive IT minister Pakistan has seen in a long time, while this caretaker government has also been the most empowered one yet in the country’s history.
But what are these initiatives that everyone, more importantly Dr Saif himself, cannot stop talking about and will they enable Pakistan’s IT industry to prosper the way Dr Saif promises?
Well, to answer the first question, the initiatives include policy reforms and programs for startups, IT firms, freelancers and telecoms. Profit explores the utility and potential of these initiatives.
Dr. Saif has introduced the Pakistan Startup Fund (PSF), a Rs 2 billion initiative, managed by Ignite and aimed at nurturing Pakistan’s emerging startup ecosystem. This move follows the previous Pakistan Tehreek-e-Insaf (PTI) government’s announcement of a Rs1 billion startup fund, with plans for management by the National Investment Trust Limited (NITL).
However, the earlier fund never materialised and was not formally launched. Dr. Saif’s PSF is a renewed effort to bolster the startup ecosystem, distinct from the previously proposed fund, and seeks to provide substantial support for the growth of startups in Pakistan.
On face value, this seems like a great initiative, however, experts from the industry have both their reservations and doubts regarding the newly installed startup fund.
According to Aman Nasir, Partner at Sarmayacar Ventures, “The startup fund initiative is a welcome development because at least the government is thinking about the venture ecosystem. It offers a 30% grant funding for rounds involving VCs; the details are a bit hazy right now as to who qualifies for the grant.”
Nasir says that the criteria for qualifying rounds is unclear, raising concerns about its ability to inject additional capital into ventures. “The requirement for VCs to participate may limit the number to around 15 to 20 active VCs in Pakistan.”
“My concerns are twofold. Firstly, the fund would fail to act as catalytic capital as there are limited funding rounds happening, especially as local venture capitalists struggle to raise capital and foreign ones are now less active,” Nasir said.
Moving onto his second concern, Nasir highlighted that grant funding encourages the wrong behaviours and breeds laziness. “Grant funding, unless for specific purposes, is not valued in the same manner as equity capital and can result in the wrong behaviours – misguided experimentation and inappropriate pricing, that hinder the development of viable business models. There are instances of companies reliant on grants that struggle to create commercially viable propositions,” Nasir explained.
This may be because the absence of investors waiting for returns becomes a demotivator for startups to reach profitability quickly.
While this may be true, sources believe that one reason why the government decided to grant equity free capital can be because when equity is involved, several other regulatory bodies such as the National Accountability Bureau (NAB) and the Federal Investigation Agency (FIA) start periodically inquiring about returns. While others seem to believe that this is yet another subsidy, aimed at incentivising VCs to invest in the country.
Nasir relayed that instead of rushing into announcements, they could have continued working on the proposals and given final approval to the incoming government. “This way, there’s a smoother transition. About 30% of the work could have been done to reach the end state, and the next government could handle the rest. It’s a more practical approach rather than a rushed, term-based one.”
There were nearly three million freelancers in Pakistan in 2022, a number that has only grown since then. These individuals heavily contribute to the IT exports of the country. In order to assist freelancers, the minister has introduced two main initiatives.
The first one is a proposal to build 10,000 E-rozgaar centres, which are essentially workspaces equipped with infrastructure, such as high-speed internet, computers and desks.
“The announcement of 10,000 E-rozgar centres is favourable for optics, yet I consider this as an unrealistic target,” says Nasir. So, the absence of a comprehensive strategy for the touted 10,000 centres seems to be a mere exaggeration.
Nasir says that we don’t need more real estate, “There is a predominant focus on constructing elaborate structures like E-rozgar centres, NASTPs and NICs. Genuine progress requires a shift away from prioritising real estate and towards significant investments in human capital development and the intangibles.”
Freelancers, by nature, don’t require the physical space of an office. If you provide them with digital infrastructure, connectivity, broadband access, and the necessary skills development, they can work from home, a warehouse, or even a café with just a laptop. One would not mind working from a fancy E-rozgaar centre, however, with the country’s handicapped public transport infrastructure and extremely long travel times for even short distances, how would one conveniently access these centres, especially female freelancers, many of whom face mobility constraints? So, certain cultural barriers have not been accounted for when devising this plan.
Seemingly a good initiative, the E-rozgaar centres may still be impractical when there is an incessant lack of necessary human resources.
Nasir advocates for a more nuanced approach, asking for the facilitation of freelancers by providing them with connectivity, broadband access, and skill development, which will eliminate the need for extensive centres.
“The program is a good step, but what I would have liked is a redesign/upgrade of the E-rozgar program. The skills needed today are different from five years ago, given the rapid developments in AI,” Nasir explained.
He believes that the problem is, it’s intangible—you can’t cut ribbons for something you can’t touch. The focus seems to be on quick announcements but not on figuring out if these are the best options. “They’re working within constraints instead of thinking about the best end result and designing it without those constraints,” he shared.
According to Nasir, the E-rozgaar initiative, originally carried out in collaboration with UNDP, has been quite effective. It offers valuable basic skills in graphic design, web development, and e-commerce to freelancers. It’s a commendable program that has the potential to be valuable if its design is carefully considered and executed correctly.
Another initiative introduced for freelancers was the PayPal remittances.
This is a new pilot program that was set in motion this month, whereby freelancers will have the added convenience of receiving their funds through the digital payment platform, PayPal. This will be done through a partnership with Payoneer.
Using PayPal directly in Pakistan is not possible due to concerns related to the exchange control regime and money laundering. Despite partnership approaches, PayPal does not currently accept transactions from Pakistan.
However, sources reveal that a new player, Elevate, an Egyptian startup backed by Y-Combinator, has entered the Pakistani market. Elevate enables companies to hold their funds in an FDIC bank and charges a transparent and low foreign exchange processing (FXP) fee, only 1% of the transaction amount. This recent entrant presents a viable alternative to traditional payment platforms like PayPal. However, this initiative seems like a valuable first step to make international digital transactions smoother for freelancers.
IT Services Firms
The ministry has shown interest in making Pakistan a global tech destination and for that, the country’s IT services industry is receiving unprecedented attention by the government. Dr Saif, with the assistance of the Special Investment Facilitation Council, announced that IT companies can now retain 50% of their earnings in dollars.
Previously, IT companies couldn’t hold U.S. dollars in Pakistan, but now they can hold up to 50% of their forex earnings.
Experts believe that this is a commendable initiative, although some say that it would have been even better if the limit had been raised to a 100% retention rate. Currently, a significant amount of money earned by IT companies in Pakistan from services and products sold abroad is still kept outside the country. Pakistan’s actual IT exports are much higher than the reported $3 billion. Increasing the dollar retention limit to 100% could encourage more of this money to be retained within Pakistan, consequently improving the country’s forex situation.
Despite being a step in the positive direction, the existing 50% limit has caused issues for some businesses. Complaints have surfaced, such as in the case of a gaming startup in Peshawar. Meezan Bank, which was handling their transactions, made the process manual and cumbersome, leading to delays, with only two out of three payments being cleared after multiple physical visits, taking over two to three months. Nasir said, “Instances like these highlight the need for strict consequences for banks causing hurdles, with substantial fines to ensure compliance with minimum standards.”
So, the initiative is a useful one, however, these manual checkings, involving entry points and transaction IDs, disrupt startups’ focus on business development, keeping them caught up in worrying about their finances. This raises questions about the implementation of these new initiatives.
Another initiative announced by Dr Saif is the IT skills training for 200,000 university graduates.
Even though they claim to train 2 lac individuals, the ministry hasn’t clarified its approach for achieving the target. While the Khyber Pakhtunkhwa Information Technology Board (KPITB) also has a program for 100,000 people, the success depends on the type of training provided. If it involves basic digital literacy or short courses, it might work for a larger scale, but for advanced skills like web development and programming, it’s wiser to begin with a smaller, pilot program, ensure its effectiveness, and then expand.
The key is to have a targeted program that prioritises quality over quantity. While the goal of reaching 200,000 is feasible, it’s crucial to focus on the design and not just aim for numbers.
More importantly, teaching coding from an early age and shifting from outdated computer classes is crucial. Nasir says that the current gap between the skills taught in schools and the demands of the private sector leads to 40,000 unfilled IT vacancies due to unemployable graduates lacking the right mindset, technical skills, and soft skills.
Creating IT centres and belatedly training graduates alone won’t address this mismatch. Rather a greater focus on early education and a carefully designed curriculum is what the country really requires.
We cannot gauge the utility of these training programs, without more transparency regarding the courses. Moreover, it is too soon to say what to expect, however, time will tell whether this was a valuable initiative or another one of the government’s misguided programs.
Speaking of Dr Saif’s IT initiatives, Chairman of P@SHA Zohaib Khan told Profit, “It was great teamwork between me and the Minister. It’s a great combination that we work so hard for the industry and are represented at the Global stage together,” while failing to share any details regarding the program and how exactly they plan on implementing it.
Lastly, the interim IT minister introduced a number of ambitious new policies and initiatives for the telecom sector.
The first one is 5G spectrum availability.
A telecom expert from one of the leading telcos in the country informed Profit that initially, policy makers failed to fully grasp the significance, but in 2014, they introduced 3G and 4G simultaneously. Although 3G was nearly obsolete, 4G had already established a thriving ecosystem globally and Pakistan, late to the scene, caught up by rolling out both technologies to bridge the gap in 2014.
However, the award process for spectrum was primarily revenue-driven, lacking consideration for the operators’ business sense. Auctions in 2014, 2016, and 2017 were expensive with limited success and spectrum availability remained insufficient due to high base prices and minimal operator interest. They said, “The solution lies in offering spectrum on attractive terms, aligning with operators’ business interests to enhance connectivity and bridge the technological gap.”
Finally, in 2023, the government, recognizing the need for change, began actively discussing modifications to the spectrum auction policy under the current caretaker minister and PTA chairman to attract increased investments in Pakistan. “The spectrum reserve price per megahertz must decrease significantly, ideally to 10% of the 2021 failed auction price of $30 million per megahertz, making it no more than $3 million for a better 5G experience. Additionally, de-dollarizing spectrum pricing is essential, as businesses shouldn’t bear the entire risk of currency devaluation. Charging fair prices in Pakistani rupees, reflecting the country’s economic reality, is a reasonable request,” our source informed.
Another issue with the 5G spectrum is that of availability of devices that can catch or support 5G signals. “Even if 5G spectrum was made available in the country, we don’t have the handsets to support it. Less than 1% of handsets (smartphones and other devices) in Pakistan support 5G due to high taxes, hindering accessibility for the general public. To create a 5G ecosystem, reducing import duties or establishing local manufacturing for affordable 5G handsets is crucial,” the expert explained.
The second initiative was a national policy for high speed Internet fibre across pakistan.
Again, this is a policy that has been long overdue. Profit learnt that the current policy for high-speed internet fibre in Pakistan involves connecting towers via fibre for efficient data transmission in a 5G environment. However, less than 10% of towers are fibre-connected, lagging behind countries like Bangladesh and India.
The challenge lies in expensive fibre right-of-way charges, hindering widespread adoption. Profit’s source said, “Various authorities impose exorbitant rates for laying fibre and we need to prioritise national interests. The decentralisation of fibre right-of-way decisions to local bodies, post the 18th amendment, leads to varied rates and profit-driven practices, impeding the implementation of the national policy.”
So, despite attempts by the ministry, local bodies resist the national policy, viewing telecom as a lucrative opportunity. The enforcement of the national policy in Pakistan faces legal and constitutional hurdles due to the 18th amendment, creating challenges for its widespread implementation. Therefore, along with national policy for fibre, the country first needs the amendment to align with national priorities and ensure accountability and enforcement of the policy for high-speed internet infrastructure.
That being said, our source highlighted the effectiveness of such initiatives only becomes clear once the implementation stage has reached so we will have to wait and see how well or unwell the outcome is.
Similarly, Jazz CEO Aamir Ibrahim said, “Judging initiatives started in a short time will not be a good idea. Better to assess 6-12 months down the road to see if any results are achieved from the announced initiatives.”
Then comes the National Space Policy.
Pakistan has been lagging behind in this space, pun intended. Finally having a national space policy is a significant step forward. The same source explained, “I read about Elon Musk’s company and John Deere, the largest U.S. tractor manufacturer and how they’re developing AI-driven autonomous tractors and harvesters connected through Elon Musk’s satellite system. In Pakistan, having space policy can open the country to a whole new world of opportunities with satellite-based applications in agriculture, mining, shipping, and more. While Starlink’s broadband may be expensive for now, the national space policy is a positive step, though its success can only be determined by future outcomes.”
Lastly, there were the telecom tribunals and telecom infrastructure sharing policy.
The establishment of a tribunal, as belated as it is, is also crucial, especially in resolving disputes with the PTA. “Disputes are inevitable in our business, and the current legal process often hampers resolution. The Provision in the Act for Tribunals, followed by recourse to the high court, is a necessary step. Tribunals are commonplace globally, addressing various issues like taxes and telecom.”
So, this initiative by the caretaker government is a commendable one, and the industry is desperately awaiting its successful implementation. This is expected to offer an efficient alternative to legal proceedings for dispute resolution in the telecom sector.
The final initiative is the telecom infrastructure sharing policy, first outlined in 2015 but actualised eight long years later and the interim government deserves credit for its release. This framework involves tower sharing, both passive infrastructure with antennas and backhaul, and active sharing, incorporating shared equipment, leading to more efficient and cost-effective infrastructure. This will enable reduction in bulky infrastructure and allow increased efficiency.
It extends to spectral sharing, an anticipated step outlined in the policy. This resource sharing will also reduce the cost of services that telcos can extend to their customers. “Lower operational costs for telecom operators translate to better consumer choices, increased investment in network development, and improved user experience and coverage. The government’s assistance in reducing business costs, through measures such as sharing infrastructure and ensuring reliable electricity supply, will foster a positive impact on both operators and consumers alike,” the expert articulated.
Dr Saif has done what no other IT minister could in less than four months. Of these dozen initiatives, some are not only extremely necessary but have also been quite delayed, while others seem to be simply for optics. As the saying goes, the proof of the pudding is in the eating, so we’ll just have to wait and see how Dr Saif’s plans to transform the sector pan out.