As the only nuclear-powered Islamic nation that is constantly in search of financial stability, it’s worth reflecting on what is holding Pakistan back. A report from the United Nations revealed that economic privileges accorded to Pakistan’s elite groups, including the corporate sector, feudal landlords, the political class, and the country’s powerful military, add up to an estimated $17.4bn, or roughly 6 percent of the country’s economy.
Furthermore, the nation runs on a weak implementation of tax collection. It covers this by taking on debt, which results in a massive outflow of payments toward interest, pensions, defense, and government expenditures. This leaves little for developmental projects that would have mitigated the impact of annual floods. The combined spending on education, with all provinces combined, is under five billion rupees. Over 20 million children are out of school. This could mean that taxation reforms are central to Pakistan’s reform. In a country of 220 million, there are 2.7 million tax filers and just 7 million taxpayers, as a safe estimate. Without contributing to intentional and direct taxes, a citizen lacks a relationship with the state and its future.
“Tax to GDP should be 13 per cent, and it is 8 per cent, which is 50 per cent below the capacity of resources if utilised ethically,” said Babar Khan Javed, the director of public affairs at Z2C Limited, a venture accelerator. “The highest income tax slab is charged 32 per cent, and the sales tax is 17 per cent, which are both regressive for the tax filing 1 per cent holding up the country and then penalising them for buying local goods. Due to lobbyists in the parliament, agriculture is not taxed and gets subsidies for urea.”
He said that due to subsidies around sugar, crop planning is poor, and water is misused. Meanwhile, the export-dependent crop of cotton has drastically fallen in output. There is one school of thought that technological problem-solving could improve the productivity of the agricultural sector, which in turn would incentivise the one per cent to invest in similar technologies.
Agriculture represents around 22 per cent of the economy, and 34 per cent of the labour force, and yields 40-50 per cent worse than the global average. This is a problem that companies such as Farmdar and Jiye Tech intend to solve, as will others as National Incubation Center (NIC) Faisalabad invited AgriTech companies in its inaugural cohort. There are opportunities for crop planning, inputs, and yield enhancement to eliminate food waste in farm-to-fork. Other startups, such as Ricult Pakistan and Tazah Technologies, are also leveraging AI and data analytics to improve efficiency in the agricultural supply chain.
Meanwhile, entities like Cargill Pakistan and Engro Fertilisers are actively working to integrate digital tools and precision farming techniques into the industry, ensuring that farmers can make data-driven decisions to enhance productivity. Various universities and research institutions are also contributing by developing AI-powered tools and drone technology for precision farming.
In the most realistic scenario, the parliamentarian that depends on low-outputs to justify interest-free loans will never sign off on anything that brings efficiency and hard work to the table. Representing just 1 per cent of the problem, this means that there are no incentives for the elite of Pakistan, most of whom inherited wealth through deals with the British Empire, to lobby for reform that saves Pakistan from the annual embarrassment of handouts.
“Regulatory capture, guaranteed returns, subsidised inputs, state-backed cartels, and monopolies are sponsored by chambers of commerce, biz councils, and industry-specific associations,” said Khan Javed. “Pakistan doesn't need aid; it needs to fix its asinine ideas on how to run an economy.”
He said that the four men running Pakistan need to develop a framework for a STEM talent-based economy for the next decade. He postulated that in doing so, Pakistan would never have to beg for money again, acting like an Islamic republic. This is the solution to increasing the export-led and talent-led GDP for Pakistan.
What is the next productive lever to pull?
In an interview with a Pakistani news channel, Systems Limited chief Asif Peer stated that freelancers might bring between $500 million to $1 billion into Pakistan. He said that, in bringing freelancers into the official record through incentives, the contributions of the ICT sector would near $3 billion annually.
“We’re currently at an annual growth rate of 40 per cent to 50 per cent, which means in five years, we can cross $10 billion worth of ICT export earnings,” said Peer. “We first need to tackle the issue of talent supply, which is insufficient to reach this goal. Since COVID-19, the demand for freelancers has increased faster than the supply of trained or graduating workers. You need to graduate or train 40,000 programmers annually to add $1 billion to ICT exports in Pakistan.”
Other companies are also stepping up to address this gap. 10Pearls, a global IT company with operations in Pakistan, runs 10Pearls University, an initiative to train software engineers and upskill professionals in emerging technologies. Similarly, S&P Global collaborates with Pakistani universities to enhance data analytics and financial modeling expertise among students. Meanwhile, organisations like CodeGirls, an initiative focused on training women in coding, and Rehan Allahwala’s Institute of Technology, which provides accessible digital skills training, are helping bridge the gap.
Given that government intervention and reform is a pipe dream, the consensus is that market leaders must partner with educational institutions to ensure courses match the current and future job market needs. Multi-million-dollar companies such as Systems Limited, Nestlé, Engro, and Walee have signed MoUs with universities nationwide to introduce industry-academia collaboration classes.
To speed up the process, venture accelerator Z2C Limited launched fast-track courses with various educational institutions nationwide. This year, they founded the Creators Academy with Off The School (OTS) in January, the ACE Digital School in February, and the ZEAL Future Enablement Program at Ziauddin University in March. Nestlé’s Agripreneurship Program, in collaboration with local universities, also aims to equip students with skills to improve Pakistan’s agricultural sector. Other companies, such as Jazz and Daraz, have also initiated training programs to prepare students for digital entrepreneurship and e-commerce.
Similar to India, which has over 20 campuses nationwide for IIT, the universities of Pakistan will also need to build more physical campuses. To solve for limited seats on campus, they would also need to introduce their own massive open online courses similar to MIT, edX, and Coursera. Reforms will be required to ensure more children go to school, as will support for initiatives such as the Orange Tree Foundation and The Citizens Foundation, which support college-going and pre-college students, respectively. In solving the global STEM talent crunch, Pakistan will enable its own economic empowerment and uplift underserved communities.
Ali Asad Sabir is working as project manager at Mahbub ul Haq research centre at Lahore University of Management Sciences (LUMS)
All facts and information are the sole responsibility of the writer