Another budget comes and goes, leaving in its wake a few fiscal tweaks here and there for the Information and Communication Technologies (ICT) industry. The industry had high hopes from the PTI that had made several campaign promises on boosting the digital economy. But a review of the budget documents suggests that it will likely be business as usual, with broadband usage not a matter of priority.
Amid an impasse on renewal of telecom licenses for three operators, the government has budgeted Rs67 billion for the ongoing fiscal and Rs53 billion for the next fiscal on account of 3G licenses. But in reality, there are no auctions planned as such, and the budget speech gave away the government's expectation of raising “in excess of $1 billion" from the renewal of telecom licenses. (For a background, read: “A steep price?" published May 13, 2019).
As renewal is more likely to happen than an auction in coming months, the line item mentioned above is most likely on account of license renewal fees. The FY19 revised sum of Rs67 billion will realise if Jazz and Telenor paid 50 percent of the fee ($450 mn per licensee) by the June 25 deadline. Also the figure of Rs53 billion next fiscal is receivable if Zong paid 50 percent of its license fee by the October deadline and Jazz and Telenor paid 20 percent of the remaining fees as first installment by June 25, 2020.
Meanwhile, the government continues to give ICT less than its economic share in development spending. For instance, the IT & Telecoms Division has only 1 percent share in the federal PSDP of Rs701 billion for FY20. But on the plus side, the ICT budget has been more than doubled vis-à-vis FY19 level, as several new schemes under the Knowledge Economy Initiative have been included. Let's see how much funding eventually reaches those new schemes worth Rs6 billion. After all, the current government had also slashed the IT budget earlier this year. (Read: “Cut in IT budget," published February 21, 2019).
With the background of falling mobile phone imports, the budget is aiming to rationalize the tax burden on handset importers and users. (Read: Cellphones: hands down," published May 30, 2019). Towards that end, the regulatory duty has been revised, with lower duty on low-end phones. The government is also withdrawing the 3 percent value addition tax on commercial imports. A media report, however, suggests that the overall tax/duty on mobile phone imports has been doubled through the budget. Clarity on the exact tax burden will emerge once the FBR issues its SRO on the matter.
In the end, the government's direction, that the ICT industry was looking for, has not become clear after the budget. That the budget speech did not even mention keywords like “broadband", “digital economy" and “e-commerce" tells government's preoccupation with other matters. The basic objective is to increase the uptake of broadband and help make the youth adept in digital work skills. For that, the government must find its line and length soon. The current auto-pilot mode, which the industry is used to, would not help the cause of raising taxes and investments. But it will lead to wasted opportunities in the digital sphere.