In the 21st century, heavy and trusted investment in the technology sector leads to separate developed nations from developing nations. This is exactly the reason behind countries like China have been leading the economic prosperity chart they have an overwhelming proportion of the competitive high-tech industry.
Unfortunately, it is not the case for Pakistan, lack of financial investment or focus on the tech sector from authorities has led to a devastating tech scene considering the percentage of the young population of the country. Despite having the potential to become a leader in science and technology due to the youth bulge, the country is currently falling behind in research and development (R&D) and has a low level of investment in these areas.
Despite having taught one of the worse tech courses in universities and literally no official level support or appreciation, the tech sector has potentially helped Islamabad to stabilize its economy and escape future economic crises. While the overall trade deficit continues to increase for Pakistan, tech is the only sector that has a trade surplus of 75%. Interestingly, the growth trend for Foreign Direct Investment (FDI) into this sector has been positive since 2017. The net flow of FDI was $65 million alone earlier this year. Pakistan’s tech sector exports services for more than $2 Billion almost every year.
But the growth of the IT sector in Pakistan is falling and though these numbers seem impressive, they are nowhere near where they should have been for a country like Pakistan. For one, the regulatory framework is not conducive to the industry’s growth.
Last year, former Prime Minister Khan announced incentives—including a tax holiday and a startup fund. However, the government changed before these announced incentives could be implemented leaving them in limbo. Since 2020, the government has introduced new tax regimes for both local and export companies each year.
Though it is not a fair comparison, for the sake of having a considerably similar young population rate, India is far far ahead of Pakistan in terms of tech development. One example which can back the point is that Apple began producing the iPhone 13 in India, and the corporation has now revealed its intentions to produce the most recent iPhone 14. This denotes many metrics such as ease of doing business, labor laws, setting up the supply chain, etc.
In addition to moving some iPhone manufacturing from China to India, the second-largest smartphone market in the world, Apple is also intending to assemble iPad tablets there, according to the report.
Pakistan needs to adopt a research-based culture before we become unmanageably distant from India and other nations in terms of innovation. The Higher Education Commission (HEC) can collaborate with and offer incentives to private universities to promote research in both the social and natural sciences.
Additionally, the state should task its research institutions to come up with modern and prudent approaches to agriculture and manufacturing so that we are able to improve our dismal productive capacity.
While Pakistan is headed in the right direction, the intent has to be followed through with policy implementation. For Pakistan to be mapped on the global technology economy, it must facilitate the organic growth of industries through supportive policies, such as ease of doing business. The single window operation is a prime example of automating the process of registrations and approvals for companies. Similarly, one of the challenges faced by companies in applying for rebate schemes was to do the documentation process in months, a process that should only take a day or two. With the process automated across government authorities involved, the benefits outweigh the cost.
Though the government has shown intent to facilitate the industry, a well-articulated, strategic policy for the growth of the technology sector might give Islamabad the economic autonomy it seeks. Islamabad may have bigger priorities right now but without taking steps to foster sustainable industries, it will find itself in an eternal cycle of crises and bailouts.