Race to dominate the field of technology

One way Pakistan could begin to ease the enormous burden of external debt it currently carries is to use public policy to develop an export-oriented industry. It has largely failed in this area, relying mostly on textile exports. Here it has run into serious competition from the countries that were able to develop the garment industry producing for exports. Bangladesh is a prime example of a state that has a vibrant garment industry although it does not grow cotton or produce yarn and cloth that goes into the production of garments for exports. Now that Pakistan has missed that particular bus, it could turn its attention on developing one resource that is seen by most in Pakistan as a burden rather than an asset. The reference here is to the country’s very young population, one of the youngest in the world. The share of the youth in the country’s population is rapidly declining. This will affect China’s progress in the field of technology. The same is happening in the United States but the Americans have an open immigration policy and encourage the arrival of well-trained young people to their country.

The government, joining hands with the private sector, should invest in developing institutions that would provide quality education and training to the youth. Thus educated and trained, the youth could develop the sector of information technology which produces services in great demand around the world. China has been a major supplier of these services but here the country is running into some serious constraints. The United States has decided to adopt a series of measures aimed at hurting the computer chip-making industry in China. The American measures have come on top of a serious demographic change in China that has resulted in significantly reducing the rate of population growth. The Chinese population is rapidly aging.

There is a three-way race on developing new technologies. These depend on the quality of the computer chips that are used for such mundane tasks as operating a toaster to advanced endeavours like launching and watching satellites that go round the Earth and perform a variety of functions including providing guidance to car drivers looking for their destinations. The competition is among the United States, China and Taiwan. For half a century designers of computer chips in the United States shrank electronic components to pack more power into tiny silicon pieces. Then about a decade ago, scientists decided it would be cheaper to pack small chips to produce ‘chiplets’ by using advanced packaging technology. “Packaging is where the action is going to be,” said Subramaniam Iyer, a professor of technology at the University of California in Los Angeles. He is one of the several Indian scientists who have moved to the United States and work in the areas in which their country had provided education and training in technologies needed by advanced nations. Chip packaging technologies are dominated by countries in East Asia. Although the United States accounts for around 12 per cent of global semiconductor production, American companies provide just 3 per cent of production. The Biden administration is now engaged in rectifying this situation. It had Congress approve the CHIPS Act that would provide a total of $52 billion subsidies to reinvigorate domestic chip-making industries, including those that do packaging.

This was not the only support the US government was giving to the chip-making industry. In March 2023, President Biden issued a finding that advanced packaging and domestic board production were essential for national security and announced $50 billion in Defense Production Act funding for American and Canadian companies in those fields. Foreign-owned companies – even those operating facilities in the United States – could not access the subsidy programmes.

These moves were aimed at slowing down China’s advance in these areas. In response, China has begun to push for more independent chip sector. While Western technology and money has pulled out, government funding is flooding in to cultivate home-grown alternatives to manufacture less advanced but still lucrative semiconductors. Chinese enterprises are working with older parts from abroad, building supply chains with countries that have the manpower and basic manufacturing ability to help larger groups in China. This is the space into which Pakistan should work to move in.

For that to be done, Pakistan should adopt two initiatives and follow both diligently. The first is that the government should write a detailed policy paper that lays down plans for the country to develop and follow to create a vibrant information technology sector. This should serve both domestic enterprises as well as link up with the supply chains in the countries that have more developed industries. Netsol Technologies, a large information technology firm based in Lahore with a significant presence in China and several other countries, is well positioned to play a pioneering role. I had been on the board of the company for several years and encouraged the management to go beyond the business of automobile leasing in which it had developed considerable reputation in East China and Europe. Among the initiatives I promoted was the setting up of a training institution that would supply it with the workforce it needed.

The second initiative should be to partner with China and domestic Pakistani universities and training institutions to set up centres of excellence for producing trained manpower in the sector of information technology. The government should think of earmarking fairly large amounts of capital for building such institutions. I am sure there is still memory of the initiative taken in the 1960s by USAID when it built and staffed rural development institutions in both East and West Pakistan. Institutions in West Pakistan included those set up in Peshawar and Lalamusa. The one in East Pakistan was at Comilla which under the stewardship of Akhtar Hameed Khan came to be internationally recognised.

Such an endeavour could be included in the under-implementation China-Pakistan Economic Program. Beijing would be interested in setting up such institutions that would produce trained manpower that China would need in great number as it moves towards more sophisticated parts of information technology. Rapid development of Artificial Intelligence would need many trained people that China may not have in the number it requires to move forward. This work should be carefully developed and watched by ministries in the federal government and departments in the provinces.

Published in The Express Tribune, May 22^nd, 2023.

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