Few might be interested in Pakistan’s digital landscape at a time when the country’s political and economic, and business environment is gasping for survival. But those still interested might be pleased to find out that, according to BR Research’s sources, revisions to 2018 Digital Pakistan Policy are currently underway, alongside an assessment of the milestones and targets hit or missed since then. To that end, the SBP’s special section on IT exports and startups in the recently released State of Pakistan’s Economy report for 1HFY23 is a timely publication.
The report talks about a number of things, ranging from the state of digital connectivity, fintech, and e-government in Pakistan, to need for digital literacy, cloud and cybersecurity, and a PM-level digital transformation secretariat and enabling sectoral policies. Of these, some thorns particularly stand out. One is that contrary to all the hype about Pakistan’s so-called IT potential, the talent pool that is ought to drive the digital Pakistan agenda lacks both depth and breadth.
Citing industry surveys by Pasha – the software houses association – SBP’s report flags that local academia is neither meeting the requirement of technical skill needed by the industry nor the soft skills. The latter is equally important given IT export potential and startups need to have lean operations with double or triple hating by founders and founding stage employees.
The report also highlights that against the demand for nearly 40,000 new employees every year by software houses and tech startups, the local academia is only producing 20000-25000 per year. This is quite a shortage; one that is giving sleepless nights to headhunters looking for talent as new hires.
That said, it is still quite a wonder that over the last several years – at least about a decade – the estimated number of IT graduates coming into the job market has remained the same: 20000-25000 per year. Are universities not responding to growing demand? Or is that the HEC does not find it worthwhile to compile and disseminate detailed statistics of graduates in the broad field of IT (and other disciplines too) along with its respective sub- disciplines, gender, university ranks and so forth?
The second key message from the report also warrants attention: that while software exports and startups have gained notable growth in the last few years –Pakistan’s economy is far from witnessing broad-based digitalization and thereby achieve digital transformation as a pathway to development.
In the case of startups, the SBP report finds the number of startups deals and funding is mainly confined to two sectors – e-commerce and fintech – whereas other important areas of economy and society that require the so-called disruption, such as health, education, e-government, logistics, agriculture, are lagging.
Channel checks inform BR Research that while government’s education and health departments suffer from the well-known disease called bureaucracy, the private sector’s education boards and the boards of hospital and OPD clinics are also not interested in taking the digital leap of faith. The best among them are only interested in the optics of being digital –look no further than most banks for reference.
Even in the two sectors where startups are concentrated, challenges remain significant. For instance, in the case of fintech, startups are mainly focused on payments. As a result, the long-standing challenges of low savings, investments, insurance, financial literacy, advisory, continue to remain on the fringes.
The e-commerce too is also constrained by low levels of public trust on e-commerce service providers amid lack of supporting regulation on the quality of services vis-à-vis quality of products delivered, timeliness of returns and refunds, privacy of customer data. Only 10 percent of those aware of e-commerce platforms actually end up using them. This gives a good indication of the level of digital literacy in the country.
Likewise, software usage in the domestic market is quite low. While the SBP’s report doesn’t put a number at the size of domestic software usage, one should not expect the number to be high given poor level of e-government in the country – that is typically a key driver of software usage in particular and digitalization in general – and low level of documentation and formal economy.
No wonder then, as SBP’s report, highlights that more than 80 percent of firms in Pakistan export less than $0.1 million and more than 90 percent export less than $0.5 million per year. If these small firms are to grow in size, domestic market usage of software ought to be increased through both carrot and stick, beginning with increased e-government and documentation of economy through formalization of sales receipts (and accounting thereof) of millions of stores and businesses.
While these are some of the areas that revisions to Digital Pakistan policy ought to muse on, there at least three other areas that require focus that weren’t either discussed in SBP’s report or weren’t adequately covered but warrant attention. First, networking effect of Pakistani diaspora. By now plenty of evidence suggests that Indian expats played a key role in growth of Indian IT exports and startups. What prevents Pakistani diaspora to do the same and what policy measures may be rolled out to leverage non-resident Pakistanis.
Second relates to the potential role of TDAP, PSEB, and commercial counselors abroad to market Pakistani software houses in foreign countries, in consideration of the fact Pakistan’s IT exports lack market diversification. The share of USA in Pakistan’s IT exports has averaged more than 55 percent between FY13-FY22; our market share in US has grown from 0.7 percent to 3.9 percent during this period. But as far as other leading IT importing countries are concerned – such as EU countries, China, Singapore, Japan – Pakistan doesn’t even seem to pay attention.
Third area that the revised Digital Pakistan policy mustn’t ignore relates to SBP’s and FBR’s strangling policies relating to FX flows, USD availability, FX retention in FX accounts, and volatile fiscal policies. And lastly, how can Pakistan’s lazy typically rent seeking industrial and financial elites can be convinced or nudged to place their bets on digitalization. To date despite all the hype, too little investment has-been made in startup sector by local investors. If local business houses don’t take a bet on what ought to be Pakistan’s future, foreign investors will stop doing it one day.
Comments
Comments are closed.