Pakistan’s start-ups - challenges and policy interventions

Country will have to improve entrepreneurial ecosystem in many dimensions.

ISLAMABAD: Recently, a committed young entrepreneur based in Lahore succeeded to secure clients from the US market at an early stage of his business venture.

Soon after, one of his employees established direct connection with US-based clients and left the parent organisation. The young entrepreneur’s hard work evaporated as his former employee started giving services to the same US clients at a much lower rate.

He is now disillusioned as there is no platform that can resolve his grievances. If there are such forums, they are inefficient and ineffective.



In short, Pakistan’s weak contract enforcement system is hindering the progress of young companies and start-ups in many ways and it is a continuous source of stress and discouragement for aspiring entrepreneurs.

However, this is not the only problem that young entrepreneurs and start-ups in Pakistan are encountering.

Other major obstacles include limited access to finance/capital, inadequate public-sector funding for research and development, unavailability of competent and trained workforce and issues relating to protection of intellectual property.

Moreover, in the absence of robust credit ratings and effective contract enforcement, the businesses also face challenges in getting timely payments for their services.

Some of the constraints faced by entrepreneurs are emanating from the weak institutional environment and a nascent entrepreneurial culture. However, it is equally important to discuss the lack of soft training of entrepreneurs and employees in educational institutions.

Engineering and computer science students, for example, may be good in technical skills, but often lack managerial and life-skills. On the other hand, management students often totally lack the technical skills.

Moreover, educational institutions rarely focus on strengthening soft skills of the students, which hinders their entrepreneurial capabilities and professional growth.

Despite these odds, the number of Pakistani start-ups has started picking up recently. A few Pakistani start-ups have raised capital from both foreign and domestic markets.

Lahore’s entrepreneurial ecosystem and Karachi’s professional talent and business agglomeration are shaping the rise of start-up culture in Pakistan. It is also appreciable that the federal government has allowed some tax exemptions for the information technology start-ups for initial three years.

The Punjab Information Technology Board, Pakistan Software Houses Association and a few incubators run by the private sector have been encouraging and mentoring young talent to help them start entrepreneurial ventures.



Some of the start-ups have left a mark at the international level. But the country’s progress towards start-ups is far below the potential.

No need to be complacent

We get excited with every news of a Pakistani start-up winning any competition at the international level, but if we compare our progress with the neighbouring country, the gap is huge and vivid.

Recently, news appeared about the selection of a few start-ups and IT companies of India for long-term commercial engagement with Airbus, a leading aircraft manufacturer. It shows the maturity and strength of entrepreneurial ecosystem in India.

Pakistan will have to improve entrepreneurial ecosystem in many dimensions. Firstly, commercial courts need to be carved out of the mainstream judicial system to provide speedy justice in case of commercial disputes.

Secondly, there is a need to strengthen the alternative dispute resolution mechanism with the collaboration of reputable international forums.

Thirdly, the funding and efficiency of research and development in universities and private sector need to be enhanced.

Also, the market size for accelerators and venture funds is considerably small, which should be augmented through an enabling regulatory framework and incentive structure.

And, universities and accelerators/incubators would have to further equip the entrepreneurs to deal with stress and failures as these are generally inevitable on the road to the growth of start-ups and young firms.

Lastly, the host cities would have to ensure an environment that is conducive for the exchange of ideas and growth of young firms.

The writer is a public policy practitioner and researcher

Published in The Express Tribune, July 31^st, 2017.

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