Experts at State Bank of Pakistan (SBP) have said the authorities in order to catalyze economic growth through digital transformation in Pakistan need to address challenges of low adoption, internet connectivity and digital literacy.
The remarks were made by a panel in the latest episode of SBP Podcast released on Friday. Experts from the central bank’s Economic Policy Review Department (EPRD) including Attaullah Abbasi, Assistant Director SBP, Ana Khattak, Assistant Director SBP, Muhammad Asghar Khan, Joint Director EPRD, shed light on Pakistan’s IT sector growth and the potential it holds for the country’s economy.
The podcast highlighted the exponential growth in Pakistan’s IT exports over the years. From a modest $290 million in 2013, IT exports soared to $890 million in 2019 and reached an impressive $2.1 billion in 2022.
“Despite a remarkable growth, Pakistan’s IT share in the global market remains relatively low at just 0.3%,” said Ana Khattak.
“There are many reasons for this – one being that our export market concentration is very high, we have traditional export markets such as the US, UAE, UK where our IT exports are traded. Pakistan needs to explore nontraditional markets for IT exports while making its products and services more competitive,” said Khattak.
“Domestic usage of IT is very low, which hampers our firms growth,” she said.
Moreover, there is a need to address the small size and financial limitations of local IT firms, the low domestic demand for IT services, and the lack of exploration of non-traditional export markets.
The podcast revealed that Pakistani startups have witnessed substantial growth in recent years.
“2021 was the best year for our startups, which approximately raised $330 to 360 million,” said Attaullah Abbasi.
However, Pakistan lags behind other countries in terms of producing unicorns (startups valued at over $1 billion), which hampers the overall impact of startups on the economy, he noted.
“The funding for startups has increased but it mostly coming from international investors, local players are still not comfortable yet,” said Abbasi, while highlighting the need to encourage local investments and improve awareness and knowledge of startups in the local market.
Additionally, a shortage of skilled IT graduates and lack of necessary soft skills pose challenges to the sector’s growth, experts pointed out.
“There is a high demand for IT graduates at about 40,000 annually, whereas our institutions are producing only 20,000 to 25,000 IT graduates annually,” said Asghar Khan.
Khan called for the establishment of boot camps to bridge the skill gap and provide market-oriented training for fresh graduates and professionals in the short-term.
On the impact of fintech on the economy of Pakistan and the challenges faced in achieving digital transformation, the experts noted that the space is rapidly evolving and growing, thanks to the role played by the SBP as the financial system regulator.
“In Pakistan, startup funding is in two sectors i.e. e-commerce and fintech,” said Abbasi.
“Initiatives such as the EMI policy and the introduction of Raast payment system have significantly contributed to the development of fintechs in the country. Additionally, the SBP has issued five digital banking licenses, bolstering the fintech ecosystem,” he added.
However, there is a dearth of adoption of fintech due to low mobile money account usage in Pakistan, moreover, there are fewer product offerings as well, highlighted the SBP Assistant Director.
The experts said quality internet connectivity is crucial for the success of IT services and businesses.
“Access to affordable and reliable internet connectivity across the country is essential for facilitating digital transformation and supporting the growth of fintech and other digital businesses,” said Ana Khattak.
“However, availability of internet connectivity alone is not sufficient to overcome the challenges,” said Asghar Khan.
“One major obstacle is the lack of digital literacy among the population,” he said, terming digital literacy fundamental for increasing digitization.
Khan said digital literacy encompasses various skills and knowledge, including cyber-security and content creation etc.
Meanwhile, Abbasi stressed on the role of government in promoting the IT sector and fostering e-governance initiatives.
He highlighted the need for government contracts to spur IT firms’ growth and efficiency, as demonstrated by successful examples from other countries i.e. Singapore.
“Pakistan ranks 50th out of 193 countries on the e-governance index,” said Abbasi.
Lastly, Ana Khattak elucidated the importance of integrating digitization into economic development policies, including the adoption of cloud computing, enhancing cybersecurity, promoting interoperability between government departments, and digitizing civil registries and taxation systems.
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