Pakistan seeks to ‘double IT industry in two years via tech zones’

Special zones to give IT industry ‘catapult push’ that could double its size to as much as $6 billion, says STZA chief

The PTI-led government is seeking to boost the IT industry in two years by establishing tech zones across the country, which offer tax breaks to investors.

In January this year, the federal government had approved the transfer of 150 acres of land to the Special Technology Zone Authority (STZA) for setting up a special zone for technological advancement in Islamabad.

The Cabinet Division said that the STZA had been established under the STZA Ordinance 2020. The authority has been mandated to set up Special Technology Zones (STZs) across Pakistan. Initially, one STZ each is to be set up in Islamabad, Lahore, Haripur, Karachi and Quetta.

The world’s fifth-most populous nation expects to open a dozen such zones by next year, STZA Chairman Amer Hashmi told Bloomberg.

It’s offering a 10-year waiver on corporate tax and imports of any equipment or building material needed for the areas, which will give Pakistan’s IT industry a “catapult push” that could double its size to as much as $6 billion in two years, he added.

Pakistan is banking on the new tech zones to create employment for its masses of young people — nearly two-thirds of its population is below 30. It’s already home to the third-largest gig economy globally after India and Bangladesh, according to Online Labour Index by Oxford Internet Institute.

Also read: Govt approves land for STZA

A flood of overseas capital into startups from fintech to e-commerce that began during the coronavirus pandemic is also creating demand for dedicated zones to serve these industries.

The initiative first emerged after Prime Minister Imran Khan sought answers at a meeting last year as to why Pakistan was missing out on the tech boom. Tapping on his own experience as an entrepreneur, Hashmi told the premier that the South Asian nation lacked a tech eco-system or an enabling environment.

Hashmi, who left his job with the International Business Machines Corp. in Canada and moved back to Pakistan to open a technology company, had to grapple with people asking for bribes and faced delays with setting up his own fibre network and data centres. The new areas will not have such issues and will be a plug-and-play model, he said.

“How do you get a Google or Microsoft or Amazon? You attract them and for that you have to give special incentives, which well I think we would have probably been the last in the region to give,” Hashmi, now chairman of Special Technology Zones Authority, said in an interview. “Dubai Internet City gave them. They got all the big companies.”

Cash-strapped Pakistan has tried several times to start similar projects in the past. In 2006, it planned to spend $1 billion to build dozens of software parks, though that effort failed. This time, the government’s efforts will involve attracting global investment to ensure the project takes off.

About half a dozen global companies and 50 domestic firms have expressed interest in setting up in proposed zones, Hashmi said, adding that as much as $1.5 billion of private investment will pour into these projects over the next two years. He is also convincing the government, which is spending millions of dollars on technology-based projects, to give more contracts to local companies. TPL Corp. is building one such tech zone in commercial capital Karachi.

“Pakistan can’t have a full-blown tech explosion. We don’t have the money,” said Habibullah Khan, founder at Penumbra, a digital marketing agency that also assists startups. “The latest public-private partnership model makes clear sense.”

Finance Minister Shaukat Tarin has also pledged to support the IT industry, which he says could help diversify exports and help the nation get out of its regular boom and bust cycles.

The industry can be a game-changer and will be given “anything they want,” Shaukat Tarin said in an interview in May.