Pakistan’s digital ascent

Think of a country no more than 25 years old, with a population the size of Hawaii; a country previously invaded by the likes of Denmark, Sweden and Germany; a country that only recently (in 1991) achieved re-independence, after 50 years of Soviet occupation; and a country wholly absent from the scene when the world was busy inventing transistors and mainframe computers. What would such a country look like? Surely, a sprawling wasteland, you would think. Enter Estonia: one of the most digitally connected countries in the world.

Estonia has defied the brunt of history by catching the digital wave. We know countries which missed the first and second industrial waves never quite caught on. Today, we’re well in the midst of the third wave: the digital age — and lagging behind is no longer an option. ‘Great change is upon us’ may be a cliche as old as humanity, but it’s quite literally true for our times. In just the span of a few years, everything has changed from the way businesses are run to the whole concept of the firm. It was the economist Ronald Coase, who said firms exist as long as they offer lower transaction costs compared to the market. But what if the transaction costs begin to approach zero? That’s roughly what we’re beginning to see with the emergence of digital economies.

In the world of big and open data, the old ways of doing things are rapidly giving way to newer approaches and innovations. The rate of change is exponential. Just like the steam engine made horse carriages obsolete, new data services are pushing hard against the status quo, and in most cases, getting through. This change is both frightening and fascinating. Consider start-ups like Airbnb and Uber. Airbnb is an online marketplace for vacation rentals which allows users to rent their property to customers seeking lodging. The idea is similar to Uber — a privately run online transportation service — but applied to the hotel industry. Both these companies are cutting into the profits of traditional taxi and hotel industries, forcing them to reassess their business models in order to stay competitive.

Quick adopters are leveraging the change. Consider the fact that the Estonians can fill out their tax returns in five minutes at their home, or sign a legally-binding contract via the Internet, anywhere in the world. Entrepreneurs can register their business within minutes. By the year 2013, 95 per cent of the tax declarations in Estonia were filled electronically. More than a decade ago, Estonia became the first country to permit online voting. Recently, the Estonian government started using a tool called e-Cabinet allowing it to streamline its decision-making process. Now, ministers can prepare for meetings, create and review the minutes without any paperwork. Cabinet meetings, which previously took several hours, reduced to only 30-60 minutes, not to mention the capital and environmental cost benefits of going paperless. Or consider the Estonian identification card (ID): the most highly-developed national ID card system in the world, which gives its citizens grand access to a constellation of e-services.

And Estonia is just one example. Many countries, from Moldova to Nigeria and Oman, have introduced digital IDs. India is on its way to registering millions, using its Aadhaar digital ID. Just in the past five years, 900 million Indians have been issued digital IDs, which will allow them to leverage online banking, monitor attendance of civil servants, and identify recipients of government subsidies. Nigeria’s e-ID programme has helped its government expose 62,000 public sector ‘ghost workers’, saving US$1 billion annually. The greatest benefit of all this, though, is the ability to integrate marginalised or disadvantaged groups into society — women and the disabled.

Governments, particularly those in digitally advanced countries like Estonia, Korea, and Singapore, are beginning to take advantage of data analytics and digital platforms for faster, more informed, and integrated policymaking. The internet allows for more participatory democracy. For example, Iceland has experimented with crowd-sourcing its constitution, and Brazil and Estonia have dabbled in collaborative law-making. To improve government accountability and engagement, there are feedback portals: LAPOR in Indonesia allows citizens to submit reports on different issues, ranging from delays in welfare payments, to damaged roads. Mobile phone apps like SeeClickFix and FixMyStreet in the US and UK, enable users to report potholes, graffiti and illegal dumping. Governments can circle back on fixes, closing the feedback loop.

The benefits of e-commerce are hard to ignore. In China, the e-commerce sector has created 10 million jobs in online stores and related services — about 1.3 per cent of the country’s employment. In Kenya, the introduction of M-Pesa, a digital payment system, reduced the cost of sending remittances by almost 90 per cent, while also creating thousands of new jobs.

Digital technologies and data analytics have been used effectively to address the Ebola crisis in West Africa; and mobile technology has brought modern banking to unserved populations across the developing world.

What all this means is Pakistan has its work cut out. With 62 per cent of the country’s population living in rural areas, there is no better time for digital inclusion. Imagine the enormous benefit of e-health in village hospitals — remote diagnostics, electronic health records, online training for nurses and doctors. Or, think of the power of e-learning in places where madrassas or substandard government schools fill the vacuum. Imagine how virtual learning — something like the Khan Academy — or online vocational programs, could transform the lives of people living away from urban centres.

But to get there, Pakistan needs heavy investment in its ICT sector. The GCI currently ranks Pakistan 118th in technological readiness. And we know digital inclusion comprises two key levers: access factors and transaction factors. Improving access factors (such as fixed broadband and mobile internet) or transaction factors (such as payment cards) is a powerful way to advance economic opportunity and digital evolution. At present, mobile penetration in Pakistan is around 65 per cent, of which only eight per cent of phones get 3G/4G. The country’s cell-site footprint, owing to relatively relaxed leasing/zoning laws, is quite impressive, but the backhaul network is weak. There is an urgent need for a high-speed fibre network to connect cities and towns. Spectrum availability and utilisation is another key factor — the PTA can release a low-band spectrum — no longer needed for defence or military purposes — to telecom carriers, so they may better leverage 3G/4G services. Infrastructure deployment can be facilitated by easing rights of way. There is also the need to dramatically expand smart phone penetration — currently at 12 per cent — by making devices more affordable by reducing import tariffs and taxes.

Modi had a point when he said cities in the past were built on riverbanks, while the future ones will be built around optical fibre networks and next generation infrastructure. Pakistan needs a similar vision: tech hubs, business clusters, smart cities and so on. The good news is, the Nawaz government has made this part of Pakistan’s 2025 vision. Now let’s see if it can follow through.

 

Published in The Express Tribune, April 8^th,  2016.

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