Information and Communication Technology (ICT) is a potential economic growth field, which rewards creativity and innovation with small investment. This potential needs to be exploited for putting Pakistan’s economy on a high-growth trajectory.
Information and Communication Technology (ICT) is a potential economic growth field, which rewards creativity and innovation with small investment. This potential needs to be exploited for putting Pakistan’s economy on a high-growth trajectory.
By coming up with right policies to tap the international market worth $4 trillion, the country’s economy can be turned around on top of creating millions of jobs as envisioned by Pakistan Tehreek-e-Insaf (PTI), the party that emerged as the strongest player in the recent vote, in its manifesto.
In accordance with Pakistan Vision 2025, the ICT industry size is targeted to reach $20 billion by 2025. For leveraging the ICT to transform the socio-economic environment and create enabling environment for knowledge economy Pakistan needs to introduce PayPal like innovative e-payment systems as advocated by Dr Nadeemul Haq former deputy chairman Planning Commission of Pakistan.
The overall development of the world depicts an era of progressive digital economies on the back of 4th industrial revolution. With increasingly efficient costs of collecting, storing, and processing data, greatly enhanced computing power, research and development of artificial intelligence and digitalisation as an instrument of transforming economic activities around the globe. Each type of economy, from the developing countries to the advanced economies, is going through their evolutionary process of digital transformation. These transformations are expected to affect value chains, skill requirements, digital literacy, design and commerce, and will require adaptations of existing legal and regulatory frameworks in various areas. This has key implications for the implementation of the 2030 Agenda for Sustainable Development, presenting significant opportunities, but also challenges, for developing countries.
The actual size of the 2016 digital economy was $11.5 trillion globally, which was 15.5 percent of the global GDP. The base digital assets comprise one-third, or $3.8 trillion, while digital spillover effects account for the remaining two-thirds, $7.5 trillion (Measuring the true impact of the digital economy, 2017). Moreover countries like New Zealand, Singapore, and Japan have been declared as the leaders, according to the Digital Evolution Index (2017). Pakistan was ranked 56th in the Digital Evolution Index 2017, while the size of its ICT industry was $3.5 billion (Ministry Planning Development and Reforms, 2018).
Digital growth in Pakistan is going through rapid evolution but there are a series of obstacles faced by this industry.
The growth is evident from the recent Pakistan Telecommunication Authority (PTA) statistics, which illustrate increased new users and deeper internet penetration via 3G/4G and broadband internet facilities.
The PTA’s recent data shows that the internet penetration via 3G and 4G is 27.18 percent and the statistics for the Broadband penetration are 28.27 percent.
State Bank of Pakistan’s (SBP) recently released data showed that the IT exports were recorded to be the highest in the history at $1.067 billion in the fiscal year 2017-18 compared to $939 million registered in the previous fiscal. This figure shows a double–digit growth of 13 percent.
The SBP also reported the data breakup of IT export goods and services. There are various IT sources of exports such as hardware and software consultancy to telecommunication. (Table I)
The Table II shows some interesting figures, especially the increase in the information service from $0.539 million to $2.277 million which is the most prominent change. Another important figure to notice in the table is the increase, which almost doubled in other computer services. These figures are illustrating the formalised sources of IT exports but Pakistan’s current digital economy has many informal players, the government policy needs to create an inclusive environment for the informal economy.
According to the industry analysts, the IT exports have grown to an estimated $2.9 billion, which is a combination of freelancers reckoned to be earning $300 million annually. The domestic market accounts for over $500 million in annual revenue, and is rapidly growing, as ICT adoption in Pakistan is increasing across verticals. Hence, the total annual revenue of Pakistan’s IT & IT Enabled Service based Business Processing and Outsourcing (ITES-BPO) Industry has crossed $3.5 billion. The A T Kearney’s Global Services Location Index 2016 ranks Pakistan at 4th as a financially attractive country in the world for outsourcing services. Furthermore, Pakistan is also ranked as the 4th most popular country for freelancing in Online Labour Index published in 2017 by Oxford Internet Institute (OII).
The World Bank estimates for IT goods exports and imports exhibits that Pakistan’s exports were 0.3 percent of the total exports of goods, whereas its imports in 2016 were reported to be 4.9 percent of total goods’ import. Other economies in the region have exports of IT goods ranging between 0 to 1 percent. The country with the highest exports is India (1 percent) and the country with lowest exports in the region is Bangladesh (0 percent) exports (World Bank, 2016). Pakistan’s IT services export accounts for 29.3 percent of the total number of services exports. In contrast, the country with the highest IT services is India (67.4 percent) and the lowest is Sri-Lanka (13.2 percent).
E-commerce has played a vital role in terms of its contribution to the digital global economy; the reported global market value of e-commerce is $1.915 trillion, with a penetration of 22 percent over the world (Hootsuite, 2016). The recent growth in Pakistan can be attributed to increasing opportunities due to greater internet penetration and emerging innovative startup ecosystem. According to SBP, there are 571 local e-commerce merchants which process payments through banking channels, with cumulative annual sales worth Rs9.8 billion as of end-June 2017. The major contributors in the ecommerce sector are Daraz, which is taken over by Chinese giant Alibaba, and Yayvo.com. E-services such as Careem, Uber, and Bykea have provided general public with transport facilitation.
Other e-commerce merchants, including ticketing platforms for businesses, such as Pakistan Railway and PIA, have made a lot of progress recently. Pakistan Railway, in its first two months, reported it generated Rs100 million as revenue from online sales.
Mobile application services are also contributing to the social issues such as Mauqa Online, a platform which is playing its role for gender empowerment. Another example of effective application is Dawai, which is a mobile application from where people can order medicines. These are few examples of the companies which have been innovative in using digital medium to provide society-level solutions.
Although there is evident progress in the digital space, there are challenges faced by the digital economy in Pakistan. Firstly, the gap between implementation and the digital policy framework, the digital policy 2017 has all the ingredients of structured and well established framework but the key question is: what endeavours are being made for implementation? The policy illustrates development of the e-governance, e-health setup, and better service delivery. There needs to be a target and performance monitoring mechanism for the development of digital economy. A well-structured and certain policy framework requires an overall investment climate that provides positive image to domestic and foreign investors (at the macro level). Furthermore, ICT-specific policies are required to increase competition and market entry, expand networks’ capacity and boundaries of service provision, promote cost efficiency, reduce prices, and improve service quality at the micro level. Other emerging economies, such as Brazil, also has a focus on development of the government system in order to improve interoperability (data, IT, registries) supported by policy levers, open data strategy and digital identity framework.
The second most significant problem is the non-existence of a legitimate e-payment gateway. These payment methods are of utmost importance as Pakistan’s e-commerce industry is on a growth trajectory; however, more than 90 percent of the payments are done via cash which increases the operational costs. E-payment methods such as PayPal are not officially operative in Pakistan. There is a common understanding that NO other alternatives exist with the facilities. Even though PayPal is a world-renowned international e-payment system, Alipay is not as common across the world, but there is a lot of talk of these payment gateways, but none of them has been formally introduced in Pakistan. The previous government initiated a project to establish an indigenous e-payment gateway but it is not yet operational. There are external pressures such as Pakistan being in the Financial Action Task Force’s (FATF) grey list, which is also an obstacle for the international e-payment gateways to operate in Pakistan.
Regional countries, such as India, already have well established e-payment methods. The growth of the Indian digital payments is expected to be driven by factors such as favourable regulatory environment, emergence of the NextGen Payment service providers and increasing significance of positive customer experience.
Countries like China and India have largely invested in technologies. India has introduced a series of projects with the main vision to digitise the government operations and enhance the delivery services. Pakistan has also streamlined projects like e-governance, e-agriculture, e-health, e-energy and e-commerce (Digital Policy, 2017). An example of a strong digital economy is New Zealand, which focuses on a combination of infrastructure, incubating start-ups, and a commitment to innovation with the support of government. While Pakistan’s government should focus on innovation, it is necessary to develop a digital security infrastructure first.
Even political parties have shown their interest towards the development of the digital economy, Pakistan Tehreek-e-Insaf (PTI) has launched a version of digital policy. The policy highlights key areas of intervention which puts an emphasis on the citizen services, e-government, and development of policies and regulations. An aspiring intervention by the PTI is the focus on the innovation of the eco-system and entrepreneurship. This could also improve Pakistan’s score on Digital Evolution Index.
Another significant policy adopted by the developing countries is enhancement of human resource with a special focus on digital learning. The development of digital economy would result into job creation, such as introducing new job roles in the development, operation, security of the digital economic progression. For this to happen, a vital factor is to train the human resource to provide them with skills required for the new jobs. It is important to understand the significance of collaboration with other countries to create a knowledge economy. It is also essential to create strong linkages between domestic industry, research, and academia for the sustainable development of the IT sector as it will have a positive impact on the quality of the human capital.
Collaboration with other economies by reaching Information Technology Agreements to remove duties and tariffs on ICT products is essential to improve trade. A vital policy instrument to compete globally in innovation driven environment is to have no restrictions on import of latest ICT technologies, e.g., 3D printers, computers, etc. Furthermore there should be no restrictions on export of value-added ICT equipment. This action will potentially expand the international trade based on research and development, innovation, and value-addition, resulting in increased exports and global competitiveness of not only ITES-BPO sector but also other technology-driven sectors.
Pakistan is witnessing a rapid e-commerce growth, which needs to be facilitated by the e-payment gateways. Advantages galore, if there is a presence of e-payment methods such as, easier method of transaction especially for businesses, rapid transaction processing. Furthermore, improvement in the digital economy through e-payment system will create potential opportunities in the IT sector. Lastly the introduction of such system would also increase financial inclusion. The government has already worked to create a better digital ecosystem but it can further facilitate private sector by giving them incentives such as ease of doing business and creation of public private forums.
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Autor(en)/Author(s): Rai Nasir Ali Khan & Muhammad Mubashir Ehsan
Quelle/Source: The News International, 20.08.2018
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