Pakistan’s path to a $1 trillion economy: embracing AI for growth

Pakistan stands at a crucial crossroads in its economic journey. With a GDP of $337.9 billion in 2023, the country has immense untapped potential. While the IT sector contributes only 1% ($3.5 billion) of GDP, this number could surge exponentially if Pakistan embraces an AI-driven economic transformation.

By adopting AI-friendly policies, reducing import duties on essential technology, and formulating special electricity tariffs for AI industries, Pakistan could unlock $1 trillion in economic growth over the next decade.

Artificial intelligence is no longer just a futuristic concept—it is the backbone of modern economies. Countries like China, the United States, and India have leveraged AI to drive innovation, enhance industrial productivity, and boost exports. Pakistan must follow suit or risk being left behind.

Pakistan’s current regulatory framework makes it difficult for AI companies to thrive. Import duties on GPUs, AI chips, and high-performance computing equipment remain prohibitively high, deterring investment. A duty-free AI import policy would lower costs for startups and research institutions, enabling them to compete globally.

Additionally, electricity remains a major hurdle for AI development. High energy costs and power shortages discourage data centers and AI-driven companies from operating efficiently. A dedicated electricity policy—offering subsidized energy rates for AI industries—would attract global investors and promote local AI-driven research and development (R&D).

Despite having a robust tech talent pool, Pakistan’s IT exports stand at a mere $3.5 billion. In contrast, neighboring India is set to cross $200 billion in IT exports by 2025. The gap is not due to a lack of talent but rather an absence of structured policies to support AI and IT growth.

If Pakistan removes tax barriers for freelancers, eases payment solutions like PayPal and Stripe, and introduces AI-friendly regulatory policies, IT exports could grow to $50-$100 billion by 2035. Tech Special Economic Zones (SEZs) with zero tax on AI startups would further incentivize investment in Pakistan’s digital economy.

A thriving AI ecosystem requires state-of-the-art digital infrastructure. Countries leading in AI investment—like the UAE, China, and the US—have built AI-powered smart cities, high-speed internet networks, and AI-driven public services.

Pakistan must follow a comprehensive model to achieve its target. It should expand 5G and fiber optic networks to enable high-speed AI applications and build AI-powered smart cities with automated public transport, smart grids, and digital governance, and launching government-backed AI innovation labs to foster breakthroughs in healthcare, fintech, agriculture, and security.

Pakistan’s industrial sector contributes over $75 billion to the GDP, but it lags in automation and AI adoption. To compete with global manufacturing powerhouses like China, Vietnam, and India, Pakistan must integrate AI, robotics, and IoT (Internet of Things) into its textile, auto, and agriculture sectors.

AI-driven manufacturing hubs can increase efficiency and output. Drone-based precision farming can optimize water usage and crop yields. Robotics in textile production can reduce costs and improve quality.

To scale AI adoption, Pakistan needs investment-friendly policies. Countries like Saudi Arabia and the UAE are pumping billions into AI and data-driven industries. Pakistan must position itself as an AI-friendly investment hub by offering a 5-10 year tax exemptions for AI-driven startups and tech investors and creating a $1 billion AI investment fund to support startups, fintech, and deep tech companies. Streamlining business registration and reducing bureaucratic hurdles for foreign AI investors.

Financial technology (fintech) is reshaping global economies. Pakistan’s digital payment ecosystem, while growing, still faces roadblocks due to outdated regulations. A regulated cryptocurrency framework and a central bank digital currency (CBDC) could unlock billions in economic value.

The government should legalize cryptocurrency trading with proper regulatory oversight, expanding AI-driven fintech solutions for microfinance and digital lending, and integrating AI into banking for automated fraud detection and risk management. AI can revolutionize Pakistan’s governance by improving efficiency, reducing corruption, and increasing transparency. The Federal Board of Revenue (FBR) could leverage AI-powered tax collection systems to prevent tax evasion, potentially increasing tax revenues by 2-3% of GDP.

Automated tax assessment to eliminate loopholes. AI-driven governance for faster decision-making in public projects. Smart public services reducing bureaucracy through AI chatbots and automation.

With AI, digital transformation, and strategic policy shifts, Pakistan’s GDP could surpass $1 trillion by 2035 and reach $2 trillion within two decades.

The table below highlights potential GDP contributions from AI-driven sectors:

Pakistan cannot afford to delay AI adoption. The world is moving toward AI-driven economies, and Pakistan must position itself as a global AI hub. With the right policies, strategic investments, and government-private sector collaboration, the country has the potential to catapult itself into the trillion-dollar economy club.

The roadmap is clear: remove regulatory barriers, invest in AI infrastructure, attract foreign investment, and integrate AI into governance, industry, and finance. If executed correctly, Pakistan can compete on the global stage and become a leader in AI-driven economic growth.

The future is AI. The question is: will Pakistan seize the opportunity or be left behind?

The article does not necessarily reflect the opinion of Business Recorder or its owners.