|Syed Ali Naseer
It is widely known that Digital Transformation has the potential to revolutionize most systems. Pakistan’s economy is no different and its drive to long-term economic prosperity is conditional on leveraging our digital assets to the maximum. Digitization can increase accessibility to markets, enhance productivity, encourage entrepreneurship, and improve financial inclusion – all critical for economic growth. It has the potential to contribute about USD 60 billion to Pakistan’s economy and provide innovative employment opportunities for 23% of the country’s population in the next 7-8 years.
A recent study by the Asian Development Bank (ADB) shows that Pakistan is struggling to capitalize on this opportunity. Analyzing the Textile and Garment Manufacturing industries, a key export sector, the report concluded that the adoption of digital practices can improve productivity by 35% by 2025. However, only 35% of the businesses in the sector showed any competence to be able to do that.
While there could be many other reasons for this, what is clearly not a reason is the effort put in by the Telecom sector in Pakistan, which has played a crucial role in driving the country’s digital transformation forward.
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It is no surprise that mobile broadband serves 98% of the country’s internet needs. With investment crossing USD 7 billion in the last five years (2017-22), the Telecom sector has equipped 194 million Pakistanis with cellular subscriptions, and 125 million with mobile broadband services. Despite these feats, digital connectivity remains a major challenge in Pakistan, where almost half of the population still remains offline. The country’s mobile broadband penetration stands at 53%, which is significantly below the South Asian region’s average of 66%, and far behind comparative counties like Nigeria (78%) and Zimbabwe (77%). To stay competitive in the race of the Fourth Industrial Revolution, it is imperative that we prioritize initiatives focused on connecting an additional 50 million Pakistanis and make internet connectivity ubiquitous for people and businesses.
To attain this goal, the Telecom sector in Pakistan must overcome the formidable hurdles that endanger its financial viability. The industry is grappling with rising operational costs due to currency devaluation, inflation, increasing interest rates, and surging energy costs. These issues have led to an escalation in dollarized costs, like spectrum licensing and Capital Expenditure on imported equipment. These costs are sadly not being offset by an appropriate increase in rupee-denominated prices, leading to a decline in overall profitability. As a result, the industry is struggling to sustain its operations; it is only able to provide basic 4G proliferation and is unable to invest in advanced infrastructure for developing a local application ecosystem and cloud services.
The lack of a healthy price benchmark in Pakistan’s telecom industry has led to intense competition between major players, resulting in the world’s second-lowest average revenue per user (ARPU) of USD 0.75. This may make services very affordable, but this comes at a tremendous cost to progress and growth. The situation is further compounded by only 56% of people in Pakistan having access to smartphones due to affordability challenges driven by high taxation. In other parts of the world, initiatives like refurbished phone marketplaces and installment plans like Instacash in Asia and M-KOPA in Africa have been instrumental in resolving the challenge of expensive handsets. In Pakistan, however, there are numerous regulatory and policy obstacles to providing handsets in installments.
To strengthen the foundation of digital transformation, it is imperative that immediate support is given to the Telecom sector. Possible solutions to provide some relief in these challenging economic times include revised spectrum prices in Pakistani rupees with installments staggered to 10 years instead of 5, implementing price controls, and offering support to the sector in terms of taxing profits, and not potential. The Telecom sector, with adequate support, has the potential to foster the growth of a strong digital ecosystem complimented by the development of locally built applications. Through the provision of incubation for startups, and secure networks, the Telecom sector can drive innovation, job creation, and economic growth via entrepreneurship.
Along with ensuring access to broadband, Pakistan has great potential to leverage the vast amount of data generated within the country. Data has become a highly valuable commodity in today’s digital economy- it’s oft referred to as “the new oil,” with various commercial as well as social welfare applications. The power of data is augmented in the fact that by simply identifying patterns in the financial transaction history, banks can detect fraudulent activity– financial institutions can deem a person worthy of loans, and this is only the tip of the iceberg. Data can be used for social welfare and for disaster response planning. It can fundamentally improve healthcare access and equity, by identifying disparities, tracking and monitoring patient’s health, and flagging risks before they become imminent.
It is critical for countries to establish means to govern and ensure control over the data generated within their borders – a concept widely recognized as data sovereignty. This is particularly relevant for Pakistan, where strategic use of data can lead to economic development and improved financial transparency, benefitting every Pakistani. To achieve this, we must strengthen the local cloud infrastructure to host data and bring it under the jurisdiction of local laws, policies, and frameworks. Likewise, there is a need to implement strong cybersecurity measures to safeguard any data pilferage. Regulating the existing network of global digital players, and governing how they use local data will help promote the growth of a local app ecosystem, contributing to the economy. Strengthening Pakistan’s digital infrastructure whilst safeguarding the privacy and security of its residents’ information, all depend on the country’s focus on data sovereignty.
Digital transformation presents a significant opportunity for Pakistan’s economy to be revolutionized, resulting in long-term prosperity. Despite the critical role the Telecom sector has played in driving the country’s digital agenda, significant challenges still need to be addressed. To deliver digital progress initiatives successfully, it is imperative that Government and Industry collaborate effectively to develop favorable policy interventions. A proactive approach to a Digital Pakistan can play an essential role in creating a robust and more prosperous future for the country.
The author is Chief Data & Strategy officer at Jazz. He tweets at @AliNaseer. The views expressed in the article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.