- Caretaker IT minister believes establishment of ‘Pakistan Startup Fund’ will help attract VCs to country
DUBAI: Dr Umar Saif, Pakistan’s caretaker federal minister for IT and Telecommunications, has a difficult job on his hands.
In Dubai, he pitched Pakistan – a nation of nearly 250 million people – as an investment destination during GITEX GLOBAL. But the economy’s large population has a dark side.
A World Bank report says the poverty headcount in Pakistan is estimated to have reached 39.4% in FY23 as a fast-depreciating rupee and heavy debt repayments leave little room for worthy public expenditure.
In IT, exports have registered an increase over several years, now hovering in the range of $2-2.5 billion, but nowhere near the potential as suggested by many experts.
An absolute lack of continuity in policies, frequent change in leadership, volatile exchange rate, and barriers in the ability to bring in foreign currency continue to hinder Pakistan’s economy currently also facing runaway inflation and slowdown in growth.
In addition, Dr Saif has an added challenge – he is supposed to be at the helm for just a few months, adding to the worry of policy-continuity.
However, he remained upbeat, and even went to the space where most investors are currently shying away from – startups.
In a conversation with Business Recorder on the sidelines of GITEX GLOBAL 2023, Dr Saif said the caretaker government is establishing a ‘Pakistan Startup Fund’, using revenue from IGNITE – which in turn is funded by a portion of the federal government’s telecom receipts.
“I spoke to a lot of people – private equity firms, VCs, multilateral and others – to understand how a framework could be established that would encourage VCs from abroad to come and invest in Pakistan’s startups,” Dr Saif told Business Recorder at the Dubai World Trade Centre on Wednesday.
“We will use IGNITE, which gets a portion of the telecom revenue and a few billion rupees go into it every year. This funding will be converted into a ‘Pakistan Startup Fund’.”
Dr Saif said the government would then become the “last check of equity-free capital in a venture capital round”.
The caretaker minister said the VC could put in 80% of equity capital, while the government would pitch in the remaining as a “grant”, which would help attract funds to the country.
His bullish stance on Pakistan’s IT companies as well as its startups – despite funding drying up at an international level due to high interest rates and uncertainty due to the global economic outlook – comes as Pakistan remains an under-sold and under-invested story, according to him.
“I have met the Pakistani companies here at GITEX. It looks very promising.
“I am here on three missions. The first is to convince companies here to give business to Pakistani entities. The second is to encourage investors in this part of the world to fund Pakistani startups,” he said.
“Pakistani startups raised close to $700 million over the last three to four years. These deals have been vetted and present a great opportunity for international investors.
“Some of these startups are about to take off. They just need a little bit of fuel to make it happen.”
Dr Saif said his third mission, as he put it, was to explore large investment opportunities in large infrastructure projects in Pakistan.
“We are about to auction the 5G spectrum in Pakistan. I have met the Malaysian IT minister. They have done it in an innovative way, and I have tried to understand how we could do it better.
“Pakistan can become the digital corridor of connectivity to Central Asian states. Some of these investments need to be made,” he said.
However, as his plans sounded long-term, inevitably, the conversation shifted to policy-continuity and if achievement of any of his ‘missions’ would be hindered by his ‘caretaker’ title.
“This is why the Special Investment Facilitation Council (SIFC) is there. It provides that degree of ‘permanency’ in policy-making and its implementation,” said Dr Saif, referring to the high-profile council Pakistan established during the tenure of the coalition-led government.
The interim minister, who has been associated with Pakistan’s IT industry in various roles previously, said the sector’s potential is unmatched.
“Dependency on imports is a major reason why Pakistan is constantly in a boom-and-bust economic cycle. But the IT sector is not too dependent on it. It largely needs human resources. Once they are trained in various international certifications, and are technically sophisticated, the potential to have a trade surplus in this sector is huge.”
Copyright Business Recorder, 2023