Can Pakistan seize its digital moment?

While digital economy has shown promise, the next phase of growth and broader transformation require a strategic shift

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ISLAMABAD:

Just as Pakistan earned global recognition for its pivot to solar energy, it is now positioning itself as a rising force in the digital economy. Named "Tech Destination of the Year" at GITEX Global 2024, Pakistan justified this award by co-hosting the first-ever Digital Foreign Direct Investment (DFDI) 2025 Conference in partnership with the Saudi-led Digital Cooperation Organisation.

The high-profile event attracted over 400 delegates and more than 200 tech companies from 30+ countries, resulting in investment commitments surpassing $700 million — a clear signal of growing international confidence in Pakistan's digital potential.

These milestones are not isolated achievements but part of a broader digital transformation taking shape across the country. Nowhere is this more evident than in export performance. While merchandise exports remain sluggish— losing over 1.5% in global export share annually for the last two decades and falling behind regional competitors — Information Communication Technology (ICT) services are charting a different trajectory.

Last year, ICT export remittances reached $3.223 billion, and in the first nine months of the current financial year, they grew by an impressive 28% year-on-year. The sector, requiring virtually no imported raw materials apart from computers, channels the majority of its export earnings into the national trade surplus. In FY2023-24, this surplus amounted to $2.827 billion — approximately 88% of total ICT remittances.

However, if Pakistan wants to build on this success and capture a meaningful share of the global digital services market, it must look outward as other successful countries are doing. For example, the United Arab Emirates (UAE) exported over $$48 billion in digital services in 2023 — more than fifteen times Pakistan's current ICT export volume. The UAE's achievements are rooted in its global digital engagement, including membership in the World Trade Organization (WTO) Information Technology Agreement (ITA) and its leadership in AI-driven trade policy frameworks.

Pakistan, by contrast, has opted out of the ITA, one of the world's most successful digital trade agreements, whose membership has grown to 86 countries accounting for over 97% of global digital trade. The only requirement for membership is to eliminate tariffs on IT products — yet Pakistan remains among the few countries, mostly from Africa, that continue to forgo the long-term gains for nominal tariff revenues.

In parallel, the WTO members are negotiating a landmark E-commerce Agreement aimed at establishing global rules for digital trade. The agreement is set to facilitate cross-border electronic transactions, reduce regulatory and technical barriers, and promote innovation in e-commerce. Unfortunately, Pakistan has once again chosen to remain on the sidelines, missing another opportunity to align itself with the future of global commerce.

The real challenge now is whether Pakistan can abandon its isolationist mindset and build an innovation-driven economy or whether it will repeat the policy failures that crippled its goods exports. In the digital sector, traditional trade barriers may not exist, but self-imposed restrictions — like the past ban on YouTube and the ongoing blockade of X (formerly Twitter) — pose a similar threat.

These platforms are vital for digital outreach, entrepreneurship, and global visibility. Blocking them undermines investor confidence and deters foreign interest in Pakistan's tech ecosystem.

To avoid repeating past mistakes, Pakistan must adopt a proactive, globally integrated digital trade strategy. This means engaging with multilateral digital agreements, opening markets, and fostering cross-border collaboration.

Encouragingly, the Ministry of Information Technology is well-positioned to lead this shift. It is led by a dynamic young minister and supported by a Federal Secretary who is an industry expert rather than a career bureaucrat.

Pakistan stands at a digital crossroads. Its recent recognition and growth in ICT exports have created a window of opportunity—but unless accompanied by global integration, enabling regulation, and policy coherence, this momentum may prove short-lived. To secure its digital future, Pakistan must shift from cautious optimism to bold action.

THE WRITER IS A SENIOR FELLOW AT THE PAKISTAN INSTITUTE OF DEVELOPMENT ECONOMICS (PIDE) AND HAS PREVIOUSLY SERVED AS PAKISTAN'S AMBASSADOR TO THE WTO AND THE FAO'S REPRESENTATIVE TO THE UNITED NATIONS IN GENEVA