Marium Akhtar
Software development and IT-enabled services (ITeS) for data centres, technical service/call centres, and telecom services make up the most of Pakistan’s Information & Communication Technology industry. After India, Bangladesh, and the USA, Pakistan is currently the fourth largest country for freelancers, with game software development being the most popular service. The majority of Pakistan's ICT industry is export-focused. Over 19,000 ICT businesses are registered with the Pakistan Software Export Board (PSEB). More than 170 countries are receiving services from Pakistan's IT and IT Enabled Services (ITeS) sectors. USA is the largest market, accounting for 54.50 percent of Pakistan’s IT exports, followed by UK with 7.90 percent, UAE with 6.90 percent, Ireland with 6.70 percent, and Singapore with 4.90 percent. According to PSEB, exports of telecommunication, computer, and information services were recorded at 2.6 billion $ during FY 2021-22, which had risen from previous figure of $2.1 billion during FY 2020-21. However, according to Finance Division’s Pakistan Economic Survey 2022-23, this figure stood at US$ 1.94 billion during FY2022-23 (Jul-Mar) which showed a decline as compared to FY 2022.
The necessity of the ICT sector in generating Pakistan's required foreign exchange earnings has been demonstrated in recent years. Comparing the IT industry's trade surplus to that of the rest of the services sector with exports to 170 countries, Pakistan's IT industry is the largest net services exporter. This industry can help the country break free from the Balance of Payments (BoP) crises, provided a conducive, convenient and efficient ecosystem is in place at the earliest. The formation of STZs is part of the government's larger objective of transforming the country into a knowledge-based economy and increasing its worldwide competitiveness in the technology sector. STZs are designated locations in Pakistan that aim to encourage and support technology-based industries and innovation.
For smooth operationalization of the STZs, a special authority called the Special Technology Zones Authority (STZA) has been created which derives its mandate from an act of parliament, namely the Special Technology Zones Authority Act 2021.
The STZA was formed by the Government of Pakistan to serve as the supreme federal agency in charge of fostering Pakistan's economic development based on science and technology. The STZs are supposed to increase ease of doing business and form a magnet to attract global and local technology players. The strategic objectives include technology exports, import substitution, foreign direct investment in technology, technology transfer, research and development, job creation and human capital development. Companies operating in tech zones are provided with a 10-year tax exemption, 10-year tax rebate, a lenient foreign exchange policy, and other incentives under the STZA Act.
There are currently 115 clusters based on this concept of STZs in USA, 169 in China, 63 in the UK, 23 in Iran, 7 in India, 5 in Malaysia, and 3 in Egypt., The announced technology zones include the Islamabad Techno polis, The Lahore Techno polis in Lahore, Pakistan Digital City in Haripur, and the Pak-Austria Fachhochschule Institute of Applied Sciences and Technology (PAF-IAST) in Haripur. These tech zones are envisioned to unlock new technology sectors beyond IT/ITeS, especially emerging tech sectors such as AgriTech, Aerospace and Defense, Gaming, Deep Tech, Maritime Tech, Advanced Engineering, AI, Machine Learning, High-End Manufacturing, and emerging technologies. Around 400 companies are currently registered in the Special Technology Zones Authority (STZA), out of which, 63% are Pakistani, while the rest belong to China, USA, Turkey and other countries.
Recently, with the focus on IT industry, particularly the software development sector, technology sector has now become a prioritized domain at federal and provincial levels. However, there are a few issues being faced by local and international technology companies to do business in Pakistan. These include complex official processes, lack of interdepartmental coordination and lengthy approval procedures which are a source of discouragement for the investors to pursue tech business in Pakistan. Presently the public sector entities are operating in scattered government bodies for science, technology, engineering and innovation. While Pakistan has established a "single window" operation under Pakistan Customs to foster a business-friendly environment across the borders, Tech industry should also be linked to this mode of operation for smooth and effective implementation of policies and ease for investors and start-ups to operate in Pakistan. The actualization of the ‘Digital One Window’ program by STZA, which is scheduled for October 2023 will reduce the processing time for applications, aligning them with global best practices, if implemented in true letter and spirit.
The recent efforts of government to speed up the STZA collaboration with the relevant departments to facilitate technology industry growth is also encouraging. Establishment of National Aerospace Science and Technology Park (NASTP) is a step towards gaining momentum in this regard. Several Memoranda of Understanding (MoUs) with both international and domestic partners have been signed by STZA both on the national and international level. International collaborations with industry leaders such as Master Card, Galaxy Racer, Shorooq Partners (UAE), and China's SEDA and ZBRA and domestic MoUs with prominent local partners, including SECP, FBR, PEC, NECOP, and IBA-CEE is a positive step in this regard. These partnerships span a wide spectrum of ecosystem requirements, encompassing regulatory compliance, policy formulation, infrastructure development, venture capital investment, cashless transaction zones, advancements in web 3.0 technologies, semiconductor innovation, and the facilitation of high-level executive training and education programs for technology leaders in Pakistan. In short, Pakistan's technology sector endeavours spearheaded by STZA should be pursued vigorously and shielded from political or economic uncertainties, given their potential to drive the country's economic development through the creation of a new export-oriented engine.
While there have been commendable developments in recent months, there remains room for enhancing the efficiency of policies and practices. To achieve this, learning and drawing insights from well-established tech zones in countries like China and US having tech exports worth 67.1 bn and 33.6 bn till 2023 July respectively and Iran, having national digital economy worth 45bn$ till March 2021 is imperative. Embracing the strategic economic opportunity that STZs offer is pivotal for Pakistan's economic growth. The successful establishment of STZs hold the promise of significant economic expansion, contingent upon our ability to address challenges strategically and promptly.