Pakistan’s IT sector in need of reforms1,612 views
Pakistan’s information and technology sector are in need of education and policy reforms to create job opportunities and to get real benefits of the fourth industrial revolution, analysts agree.
“IT is a great equaliser in many ways…the space for entrepreneurship is huge in this sector,” says Dr Umar Saif, chairman at the Punjab IT Board. But, “policies and regulatory environment should be conducive for global technology vendors,” says Dr Saif who did Ph.D. in computer science from the University of Cambridge.
Technology bellwethers Google, Microsoft and Amazon are glad to enter India, Bangladesh and Sri Lanka, but they are hesitant to come to Pakistan.
One wonders how long will it take for the IT sector in Pakistan to get ‘Amazoned’ and ‘Ubered’.
To Dr Shoab Khan, ex-chairman at Pakistan Software Houses Association (Pasha) the absence of foreign vendors in Pakistan “is alarming.”
International online payment system Paypal is not operating from Pakistan and therefore internet players are largely disconnected from the digital e-commerce world. Pakistan’s e-commerce market has an estimated value of US$30 million with online shoppers mainly paying cash on delivery.
For a last couple of years, YouTube was banned for containing some controversial content.
“Unlike India, Pakistan’s focuses more on corridors than on IT education,” rues Dr Khan, who received his Ph.D. in electrical and computer engineering from Georgia Institute of Technology, Atlanta.
“All over the world, IT is being used as a tool to reduce income inequality and economic disparity,” he says.
A World Economic Forum’s global survey of 1,000 young people found that information technology can become a driving force to alleviate poverty in the underdeveloped economies.
Pakistan is slowly emerging on the global technology scene with an annual two billion US dollars of software exports – much below its neighbouring India’s US$100 billion.
A number of Pakistani technology companies, Dr Khan says, is registered abroad, “therefore our exports are not significant.”
It is believed that offshore ventures usually send profits and dividends back home in the form of remittances.
In the recent past, a few IT startups in Pakistan have come in the limelight by raising funds from foreign venture capital firms. Naseeb Networks, the parent company of Pakistan’s Rozee.pk and Saudi’s Mihnati.com, convinced UK’s Piton Capital into funding its product development. Likewise, property portal Zameen.com raised investment from Singapore-based Catcha Group.
“Now, small companies are making their presence felt,” remarks Khurram Zafar, who heads LUMS Centre of Entrepreneurship, a business incubator and accelerator.
“Yet, access to capital is still a critical barrier,” Zafar says.
He says an IT venture is not originally capital-intensive, “but you need money to scale it up.”
“Value assessment of an IT business is quite a new concept in Pakistan,” he adds. “Perception is being changed…I would say [now] mindset has to be transformed to build an entrepreneurial ecosystem.”
Tech startup Uber has managed to raise its equity funding to US$7.4 billion in just a couple of months, going one notch above the world’s number third digital startup Airbnb, a worldwide accommodations leader.
“It takes 10 to 15 years for turning around a sector if the direction is right, but, unfortunately, our direction is not right,” says Dr Khan.
Zafar argues that the direction is absolutely right, supporting his argument with incubation statistics.
He says LUMS centre has launched 31 companies and inducted 157 of its graduates in different organisations since its inception in March 2014.
“Our graduates have an annualised revenue of around one million US dollar,” says Zafar.
Another incubator Plan 9, the brainchild of Dr Saif, has similar claims to fame.
PBIT chief says the Punjab government is about to start a new venture capital fund with an initial outlay of around three million US dollar.
Pasha founder Jehan Ara is also running a tech incubator Nest i/O in collaboration with Samsung and Google in Karachi.
The encouraging environment for entrepreneurs is reflecting in growth in their freelance earnings from online workplaces, such as Up work, formerly Elance-oDesk, Craigslist and Damongo.
Independent professionals earn from these platforms through completing various IT tasks, such as quality testing, source code management, video editing and content writing.
An Up works report recorded 10 to 25 percent growth in freelance earnings by Pakistan in 2014. The report ranks Pakistan among the top 10 earning countries in the world.
Dr Saif says Pakistan is the fourth largest country in the world in freelancing business, fetching US$850 million per annum. Pakistan gets 10,000 IT grads every year and the country’s IT and IT-enabled services industry directly and indirectly employs 400,000 people.
PBIT chief agrees with Pasha ex-chairman that the government should refrain from slapping taxes on local technology firms.
“Taxes may hamper growth,” he concludes.