A Tech Revolution Brews in Pakistan

[GlobalVillageSpace]

Global Village Space |
Pakistan, a nation by design, lives and thrives upon the bedrock of ancient lands and cultures. Regions that Pakistan consists of are home to some of the oldest civilizations in human history, which for the most part, have been an agrarian society since time immemorial. Therefore, Pakistan, upon its birth in 1947, inherited an agricultural economy that still functioned the good old way. The scale of mechanization in agriculture, the construction of canal systems, dams, water distribution systems, and advancements in technology helped Pakistan increase its agricultural output – leading to the development of an agri-centric export economy, especially the textile industry.

Despite its early success, the Pakistani economy could not diversify or transform itself from an agricultural economy into an industrialized economy – as it was done by South Korea, Japan, China, Taiwan, and several other Southeast Asian economies; therefore, the story of Pakistan is the story of missed opportunities.

Pakistan not only missed out on the post-World-War-II industrial rush but also missed many opportunities to become a diversified economy later on, such as mining, tourism, food, defense R&D and manufacturing, automobile, and hydrocarbon sectors of the economy. This situation has landed Pakistan into a trap – where Pakistan’s imports, driven by a growing middle class, are increasing in contrast to its exports, a problem that continues to plague the Pakistani economy to date. Although mega projects like CPEC are creating new opportunities for Pakistan and opening doors to industrialization, the growth in Pakistan’s population calls for fresh, disruptive ideas to build an economy of tomorrow; that is where the tech industry comes in.

The world we live in and the world where our children will live in is increasingly interconnected, smaller, and defined by the growth in technologies that affect all sectors of human society. The contemporary world is defined by cutting edge technologies like Artificial Intelligence, Data Science, Intelligent Process Automation, Edge Computing, Extended Reality, 5G, Blockchain, Cyber Security, Internet of Things, Human Augmentation, Bio-Informatics, Drones, Genomics, Autonomous Vehicles, Health Tech, Education Tech, Space Exploration, Advance Navigation, Automated Agri-Tech, Additive Manufacturing and advance Military and Defense systems to name a few.

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A Tech Revolution Brews in Pakistan​

 

[S.Y.A]

Yes, there is a tech revolution, but most of the startups move abroad and register in UAE or singapore after securing significant funding. SECP, State Bank, MoFinance, FBR etc. should sit together and figure why this is happening and what is going wrong.

 

[R Wing]

Yes, there is a tech revolution, but most of the startups move abroad and register in UAE or singapore after securing significant funding. SECP, State Bank, MoFinance, FBR etc. should sit together and figure why this is happening and what is going wrong.

Pakistan, unfortunately, does not operate on what a normal country dying to escape a poverty trap 'should' do.

There are many obvious things, from structural reforms to policies, that Pakistan should be doing (many of them are even financially and politically inexpensive), yet we don't do them.

 

[S.Y.A]

Pakistan, unfortunately, does not operate on what a normal country dying to escape a poverty trap 'should' do.

There are many obvious things, from structural reforms to policies, that Pakistan should be doing (many of them are even financially and politically inexpensive), yet we don't do them.

true, take government rules for example, all of them (rules of business and secretariat instruction etc) were developed in 1973, yet the govt has done nothing to update them, hell, introduce new ones to cater to 21st century needs. the e-office initiative of PTI is rubbish without changing these rules.

 

[Bouncer]

Yes, there is a tech revolution, but most of the startups move abroad and register in UAE or singapore after securing significant funding. SECP, State Bank, MoFinance, FBR etc. should sit together and figure why this is happening and what is going wrong.

Government needs to get out of the way for businesses to thrive. If these state institutions like FBR are given anymore free hand, than what they already have, then these companies that have their IT back offices here will also run away.

Companies register abroad in places like Singapore, Ireland and Dubai because their CLIENTS trust these jurisdictions. They know that if a dispute arises then the courts in these countries will provide them justice. No sane client wants to sign a multi-million dollar services contract with a company that has to use Islamabad, Lahore or Karachi courts as arbitration forums.

On top of that, founders of these companies want stability in policies. Every budget and mini budget brings mini heart attacks for these people k ab pta nahi kya gul khilana hai sarkaar ne. Every year it is the same story that some finance ministry baboo comes up with this brilliant idea to impose taxes on these companies. CEOs/CFOs need stability for business planning and investments, which Pakistan currently does not provide.

Government at the very least needs to ensure that a) long term tax holidays and incentives are formulated b) stick to these policies and NOT talk about changing them every June/December.

The only reason we have come this far is because Ministry of Finance and FBR could not touch these companies. Lets keep it as-is.

Edit: just to give you a relevant example.

Telcos are among the highest taxed industry in Pakistan. Some of the things these companies have had to bear with in just past 5 or so years;

1. Supreme Court of Pakistan ordered telco to give Rs. 100 recharge on Rs. 100 card. This is not a human rights issue..this is a business decision. Supreme court, instead of working on actual human rights issues which are aplenty in this dear land of ours, chose to become Robin Hood.

2. Government charged 15% advance income tax from telco subscribers and 19.5% General Sales tax. How does it make any sense to charge advance income tax from a laborer or a student? A subscriber adds money to their account using services provided by a telco (which require investments at back end) and the telco is forced to act as a tax collection agent.

3. Pakistan Telecom Authority, headed by a retired General sb, in all its wisdom comes up with regulations like if e.g. someone claims that XYZ telco caused them a loss of Rs. 100 then that telco has to submit this amount with PTA in escrow and this amount will remain in escrow till the courts decide on it. That introduces a significant risk to business.

4. Licensing regime is a cash cow for PTA/FBR. Per capita income and corresponding Average Revenue per User is among the lowest in the world for Telcos yet the Gov expects them to pay license costs at first world rates. There is a reason why telcos do not invest as much as they should in this country.

5. As I mentioned in point-2-- so 15% advance income tax, 19.5% GST and then there is corporate tax on top of it. At the end of the day very little is left for telcos to invest. Our broadband speeds are among the lowest in the world because of reasons like these.

These are just a few examples of over-regulation in Pakistan. Government needs to provide space to these companies to grow instead of treating them like cash cows. The actual cash cows like traders, property dealers and other big fish who pay zero taxes need to brought in to tax net to pay their fair share.