High taxation key barrier to development

This is followed by low connectivity, lack of awareness on the demand side

Parvez Iftikhar January 01, 2017

ISLAMABAD: Information and communications technology (ICT) development in Pakistan has certainly received a healthy boost in 2016.

This year broadband penetration rate increased from 3% to 15% and mobile broadband services are now available across 200 cities in the country.

Tax collection a failed system in Pakistan

IT investments in Pakistan have also increased to $5.1 billion and the sector has been generating jobs with the emergence of new technologies in ICT.

However, despite these positive developments, mass-scale ICT adoption is necessary to achieve the development goals, and therefore we must strive to lower the barriers to ICT adoption.

Some of the major impediments to growth are outlined below:


The first and probably the biggest barrier is that of taxes. ITU’s 2015 report shows that internet usage in Pakistan is less than in Bangladesh, Nepal, Sri Lanka and India. The State Bank of Pakistan in its report ‘State of Pakistan Economy 2015’ noted that low usage was due to heavy taxation. Not only that Pakistan has one of the highest ICT related taxes in the world, even within the country ICT services are more heavily taxed than other sectors!

Already at the entry stage there is the barrier of taxes on smartphones. Without taxes, the cheapest smartphones in Pakistan would cost below Rs3,000– still beyond the reach of nearly thirty percent of our population which lives below the poverty line and earns less than Rs 3,000 per month.

Revenue collection up a little, tax hike up a lot

Tax barrier is significant because it also prevents fresh ICT investments in the country. For that we could emulate eighty-two other countries who are reaping the fruits of acceding to WTO’s 1996 “Information Technology Agreement” (ITA), eliminating tariffs on IT products.

Fibre Connectivity

Needless to say, without data connectivity there can be no ICT, but large parts of the country are deprived of it. Indeed, mobile operators are busy expanding their data (3G/4G) networks, but at current pace it will take over a decade for major part of nation’s population to get reasonable data connectivity. Some smart countries are building optic fiber information highways in the public sector, with unrestricted equal access to all, in rural as well as metropolitan areas. Perhaps we do the same. These information highways need time to build, whereas we need them already today.

Right of way

Obtaining the necessary Right-of-Way (RoW) for telecom cables and towers is a barrier hindering deployment of ICT infrastructure. From city governments, to cantonment boards to union councils, all seem to view RoW as an easy way to make money. Federal government sets the precedence by keeping high floor price of that ‘RoW through the air’ – ie the spectrum. In fact, the spectrum is ‘hoarded’ awaiting days when the ICT wireless services start getting choked, forcing operators to cough up larger sums of money for the spectrum. Facilitating RoW for ICTs should become a priority.

The demand side

Unlike voice telephony, making widespread productive use of internet demands at least three pre-requisites - easy-to-understand local language content, affordable devices, and basic digital literacy. This more-or-less constitutes the so-called, “demand side”.  In order for our people to use internet in a way that benefits them (and not just entertains), the demand side has to be addressed much more vigorously.

Unfortunately, the responsibility for demand side falls entirely on federal and provincial governments, because it addresses basic human needs like education, health-care, governance, employment, gender empowerment, skills development.

For all these ‘basics’ massive amount of audio-video content in local languages needs to be created on a continuous basis. It should do things like: explaining the text books lessons to school children, informing the farmers about modern methods of farming, educating health workers on how to deal with seasonal and viral epidemics, teaching skills to plumbers, carpenters, electricians, masons, painters, mechanics, coaching citizens who find it difficult to leave homes (especially women and persons with disabilities), the list is endless.

Such content, accessible via broadband, over that near-ubiquitous device called smartphone, would benefit everyone, provided the smartphone is affordable.

Basic digital literacy must be taught in every primary school. Emphasis should be on how to productively use computers, tablets and smartphones, together with broadband. Other than schools, multipurpose telecenters can also help in spreading digital literacy, but those centers must be in thousands, not hundreds.

Government as ICT user itself

Most of these barriers to ICT adoption would start disappearing if the government itself becomes a big user of ICTs. In all the countries that have soared ahead in ICT adoption (like South Korea), it is the governments who have led the way by becoming big ICT users. This particular barrier is linked to lack of attention by the top leadership in the country. The wonderful example of Mahathir Mohammad of Malaysia may be seen in this regard. It is only after the governments (both federal and provincial) take appropriate initiatives and the necessary market conditions develop, that the private sector would also join in.

There are several other barriers to ICT adoption – both direct as well as indirect – like gaps in the Intellectual Property Rights regime, pending rationalisation of telecom licencing framework and spectrum sharing, and other such measures that are already part of the new forward looking Telecom Policy, but are awaiting actions.

Once ICT is universally adopted by our bulging youth population, we would witness a revolution of its own kind.

The writer is former CEO of the Universal Services Fund and is providing ICT consultancy services in several countries of Africa and Asia

Published in The Express Tribune, January 2nd, 2017.

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Manzoor Ahmad | 5 years ago | Reply A must read article for all policy-makers, particularly those at the Ministry of Finance and FBR. It’s a pity that instead of being a facilitator, our government is the biggest hurdle in the promotion of information technology in the country. While allowing duty free import of machinery for manufacturing yarn is not considered a loss, that for producing software and improving productivity is considered a loss of revenue. While the government of Punjab is distributing free laptops, the Federal Government is taxing them thus pushing other provinces like KP, Sindh and Baluchistan further behind. It is simple maths. If the government is losing Rs 4 billion in taxes through allowing duty free imports, they would make many time more in dollars through export of software and other IT services. Productivity will grow many folds and so would education.
Haseeb Khan | 5 years ago | Reply FBR in last one year has been badly run down with short sighted policies
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