Among key enablers of GDP growth, digital economy now sits prominently. But for a government aiming for ‘Digital Pakistan,’ the latest economic survey is unable to showcase how the policy and regulatory tools are being leveraged to boost growth through information and communication technologies (ICTs). The export-oriented IT sector and the tax-rich telecoms sector seem to be running on auto-pilot mode.
When it comes to the IT sector, the government’s focus is intent on the supply-side: making buildings to house IT Parks, funding myriad public-sector IT bodies to haphazardly build capacity, and providing untargeted income tax breaks without much to show for it. Meanwhile, demand-side assessment, innovation imperatives, and need for centralized government procurement to help local IT businesses build scale, all continue to be ignored. Governments before have also been guilty of same offence.
In the telecom sector, throughout 2019, the legal contention over the renewal of cellular licenses of three operators remained a source of friction between the government and the industry. In what is billed as a ‘policy intervention,’ the economic survey breaks this news that the issue is resolved. After paying 50 percent fee ($688 mn or Rs108 bn), the remaining amount is to be deposited in five equal installments.
Put another way, there will be no change in policy framework, and it was telcos that had to budge. This hardly inspires investor confidence when the government is merely interested in non-tax revenues. (Over Rs20 bn is assured for FY21, so hurrah)! This is significant because the government leans on the industry to usher in the 5G network technology, for which a lot of policy and technical work needs to be done. Right now amid Covid, government needs to facilitate broadband providers to maintain network quality.
On the policy front, the needle hasn’t moved much, other than the rollout of the E-commerce Policy earlier this year. Telcos have been calling for a ‘right of way’ policy for quite some time so they can easily lay out their fiber optic cables for faster and reliable internet connectivity, but there is no tangible progress. Cyber-security remains a contentious issue due to expansive interpretation of recent laws. The passage of Citizens Protection (Against Online Harm) Rules (2020) has social media firms up in arms.
There is one regulatory measure that stands out brightly though! Despite lobbying from vested interests, the PTA’s smooth functioning of the Device Identification Registration and Blocking System (DIRBS) has provided a level-playing field. It has ensured that smuggled devices and gadgets don’t hurt legitimate players or drain import dollars through other means. As a result, FBR is expected to collect Rs50 billion from mobile import taxes this fiscal, an amount that is more than double from last year.
This policy has also helped local device assembly, a sector in which 31 manufacturers have been formally approved and more than 3,000 jobs have already been created in recent years. The economic survey notes that roughly 12 million locally-produced handsets were registered on DIRBS in 2019, which is more than double the previous year. Pakistan needs to build scale in device assembly and level up for exports.
In the times of Covid, there was a lot that the government could have done for the digital economy, as the cloud wasn’t infected. But the most the government did was to allow call centers to operate amidst lockdowns (something which has helped the exports of BPO houses) and waive online fund transfer charges (which might have boosted digital payments). Here is hoping that today’s budget has something for the invisible sectors in the shape of fiscal incentives as well as ease of doing business.
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