Is this Pakistan’s Silicon Valley moment?
Technology being the core growth driver, the 21st century is the century of tech entrepreneurs. It has been dubbed by analysts as the age of information and technology, where the concept of “global village” has transformed into the idea of a “global tech-city”. This age has seen expansion in the employment pool for firms around the globe, wherein outsourcing of tasks has become an increasingly popular way to maintain competitiveness in global markets. In the recent years, this decentralised job market has poured quickly into Asia. For a country struggling with economic woes, these developments are a God-sent opportunity for us to utilise its youth-bulge as a dividend, for economic progress.
Pakistan has a significant potential in e-commerce and freelancing due to its large population, a young and tech-savvy workforce, and growing internet penetration. At 200 million people strong, Pakistan has the fifth largest youth population in the world in absolute terms. The country has a thriving e-commerce market, with an estimated worth of $1.8 billion in 2021. Being one of the largest freelancing markets in the world, it has over two million registered freelancers, positioning it at third place on the Oxford Online Labour Index.
What we have
Beyond demographic indicators, digital consumption is on the rise, driven by an improvement in connectivity. According to Pakistan Telecommunication Authority, local telecoms boast 195 million subscribers with almost 58% of these having access to 3G/4G services. Moreover, the Higher Education Commission (HEC) reports highlight that the country has over 300 thousand active Information and Communications Technology engineers, with 20 thousand graduating every year. The statistics lay testament to the fact that Pakistan has the right intrinsic drivers to tap into the freelancing landscape and house high-valuation startups. What it needs is a cogent roadmap and dedicated efforts to realise its full potential. A good blueprint to emulate, in this regards, is available right next door in Bangalore, India.
The boom in Bangalore
This city of almost 12 million inhabitants, has been dubbed by many as the “Silicon Valley of the East”, a title that is well deserved. Bangalore has a 36% share in the total Indian Information Technology exports of $160 billion, which calculates to a mammoth $58 billion. In comparison, Pakistan’s total exports in the financial year 2021/22 was $31.5 billion of which IT exports were a mere $2.6 billion. With each passing year, Bangalore is becoming more attractive for international tech investments, while a number of Fortune 500 companies already have their development centres and research facilities there. Whereas, despite having the right intrinsic catalysts for an IT sector boom, Pakistan remains unable to effectively tap into its full potential.
What we need to do
A dispassionate analysis of the Bangalore model reveals a few gaps in the Pakistani IT landscape that need to be plugged in order to institute a strong startup ecosystem in the country. For this purpose, Pakistan needs to follow a three-pronged approach that focuses on designing enabling policies, making project funding accessible and investing in human resource development. More importantly, what is required is a continuity of policy, and commitment to the cause of pushing Pakistan towards a strong IT economy. Let us discuss these propositions in detail.
Our profile
Pakistan has struggled, over the years, to establish a facilitating environment for businesses and investors. While there has been some improvement in recent years, Pakistan still ranks at 108 among 190 countries in the World Bank’s “Ease of Doing Business” index. A deeper view of Pakistan’s profile reveals that it ranks lowest in the indicators that are most relevant for entrepreneurs, which include “Starting a Business”, “Paying Taxes” and “Enforcing Contracts”. For starting a business index, the main issue is the red-tapism prevalent in the functioning of our government. For this purpose, the government has taken steps such as integration of e-services with the Federal Board of Revenue and setting up business registration portals. However, work needs to be done to ensure availability of staff and further improving the facilitation infrastructure.
Our systems need to shape up
Being able to enforce contracts is critical for both investors and startups, but the delays in the Pakistani legal system, which already has a backlog of almost 2.1 million cases, is highly discouraging. Judicial sector reforms, especially setting up more e-courts for timely disposal of cases, is key to increasing investor confidence. Lastly, there is a need to simplify tax laws in Pakistan, so as to make them easily comprehensible for the general public. Likewise, tax registration and payment processes need to be made easier by introducing online payment portals with digital payment options and improving applications already introduced. A dedicated helpline for this purpose can also help improve the process of paying taxes by resolving any potential issues that might arise. This is essential to set up an enabling ecosystems for startups to take root.
Creating a startup culture
For a startup to flourish, it is essential that ample avenues of investment are available. In Pakistan, unfortunately, local funding organisations and individuals are more inclined towards funding well-established and traditional businesses over startups. There is a need to change these attitudes by informing people of the potential of the IT sector and providing spaces for startups to market their products. For this purpose, the Ministry of Information Technology and Telecommunication can play a role in organising various IT-related expos both in and outside the country to enhance funding opportunities for startups.
A flow of funds
The government should also work to improve access to formal financial services and provide business friendly loans to strengthen the funding landscape in the country. A strong funding outlook feeds into the quest for a well-grounded startup ecosystem.
Cultivating a talent pool
As a final piece in the puzzle of a booming IT sector, the government needs to invest in cultivating local talent. Pakistan produces almost 300,000 university graduates from its almost 190 HEC-recognised universities, every year. Despite this, the talent pool in the country remains limited ― largely due to the academia-industry mismatch and the problem of brain drain.
Consequently, despite having a large pool of graduates, Pakistan ranks 109 out of 119 countries on the Talent Competitiveness Index. Therefore, there is an urgent need to invest in and develop talent to drive innovation in the IT sector. For this purpose, both academia and government have a crucial role to play.
Fostering entrepreneurial talent for startups through university networks is a globally acclaimed practice. Universities, with in-house research facilities and relevant curriculum, not only serve to nurture the skillset of its adherents, but also develop a startup culture which is critical for furthering the cause of entrepreneurial activity in the country. Therefore, they serve as spaces for not just cultivating talent but also providing an environment suited for translating that talent into practical outcomes.
In Pakistan various private sector universities such as LUMS, NUST, GIKI have taken the lead in developing such habitats of innovation. Many of these universities have set up incubation centres that serve as a bridge between entrepreneurs, innovators and investors. These little hubs of innovation have been pivotal in inculcating a spirit for entrepreneurship amongst their degree holders. Sadly, government universities, which produce the most graduates in Pakistan, still lag in this regard. With outdated resources and barely any investment in research and development, these universities remain devoid of a startup ecosystem. Consequently, the overall impact of these private sector initiatives remain limited and small scale. Therefore, there is a need to invest in upgrading the potential of public universities for research and development.
Another viable means of working towards human resource development is through vocational training programmes. Teaching digital skills to the younger population can help enhance their technical skillset. For this purpose, the government can partner with vocational training centres and global institutions such as Google, Microsoft, etc. It can also co-operate with the private sector to set up programming boot camps to dispense various skills among the younger population. Such initiatives can not only upskill the workforce but also give rise to the culture of freelancing which directly feeds into strengthening the startup ecosystem. As more people get involved and experienced in freelance work, they not only become revenue generators by tapping into the gig economy, but also cultivate experience and talent which can be utilised by local startups. There are various examples from around the world where freelancers have banded together to initiate successful startups.
Continued commitment
As a final ingredient for this recipe of IT progress, and perhaps the most important, is a commitment of continuity. Pakistan currently lies at the crossroads of history, wherein it is riddled by challenges of unprecedented nature. A nose-diving economy has added to its woes in the recent months, pushing it further towards a national crisis. But genius lies in seeing opportunity in crisis. Pakistan is a densely populated country with a consumption-led economy and the right intrinsic drivers to attract startups. It has a burgeoning middle class and a young population that is rapidly becoming digital-savvy. The country is primed to take a front line role in the Industrial Revolution 2.0 that features progress in the IT sector. With all the intrinsic drivers in place, and a roadmap of progress in sight, what is required is to stay committed to taking steps necessary for preparing Pakistan for an IT boom. The government needs to ensure continuity in its resolution to plug the gaps that exist in our IT sector landscape, and in its commitment to establish an enabling ecosystem for the startup culture to take root and flourish. This is Pakistan’s Silicon Valley moment, and the time is now for Pakistan to wholly commit itself in seizing this opportunity.
Qasim Farooq is a LUMS Graduate and Information Officer at PID. All information and facts are the responsibility of the writer