4th industrial revolution is taking place and it is largely digital. In 2021, the global information technology (IT) industry is estimated to be valued at 5 trillion U.S. dollars. Asia is expected to be a large contributor to the global information technology industry, with 32 percent of the market share.
However, Pakistan lags behind the world. With our IT industry’s revenue at $3.5 billion dollars. Even though Pakistan is the third most popular Freelancer destination according to the Online Labor Index by Oxford Internet Institute, the $1.2 billion industry is not regulated by the central bank owing to the outdated regulations in the economy.
Pakistan’s exports of information technology and enabled services are expected to reach $1.2 billion by the end of the current fiscal year compared to $831.4 million a year earlier.
However, Pakistan’s IT sector has multiple issues.
Pakistan’s workforce is low-end software developers rather than designers, architects, subject matter experts, testers, account managers, and more. The next wave of jobs will be in the Fourth Industrial Revolution (4IR) and it will need people in areas such as robotics, artificial intelligence (AI), nanotechnology, quantum computing, biotechnology, The Internet of Things (IoT), 3D printing, and autonomous vehicles.
The blame is largely on the education sector, where there is a huge gap between the supply of skills from the universities and the demand of the technology sector. Thus, out of the total graduates, 10% come out of first-tier universities and only a half of them meet the skill requirements of the industry.
Co-working spaces are not widespread due to the rules by the corporate housing schemes disallowing conversion of residential areas into working spaces like they are done all over the world, increasing costs for startups.
Access to funding is a significant bottleneck. There is only $0.06 per capita of venture capital money in Pakistan per year, while Bangladesh has $0.07, Nigeria $0.18, and India $3.72. The issue is two-fold: regulations make it cumbersome to set up a fund inside Pakistan; regulations make it hard to get money out of the country. The red tape by SECP and SBP makes it difficult to invest in the country.
Steps taken by the Imran Khan Government
To counter all these issues, the government of Pakistan has been working to introduce Special Technology Zones (STZs) all over the country to further boost the IT industry.
In an interview with ARY, Chairperson Special Technology Zones Authority said that Pakistan, if resources are utilized well, will be catapulting to the top of the IT world, which is expected to make a revenue of $10 billion in two to three years’ time.
In this respect, the first Special Technology Zone (STZ) in Islamabad is going to be built on 150 acres of land, which has been acquired by STZA and inaugurated by the Prime Minister two days ago. Similarly, in Haripur, the STZ is going to be a part of the Pak-Austria Fachhochschule Institute of Applied Sciences and Technology.
These are the initial of much STZs government has planned to build to boost the IT sector of the country.
Ministry of Science and Technology is also making Pakistan’s first National Science and Technology Park on 40 acres of land, making it the country’s first technology park.
Such STZs and technology parks will make a knowledge ecosystem comprising of IT universities, think tanks working on policies, IT companies including domestic and international ones, and incubators.
These would provide employment and skill-building opportunities to the youth of Pakistan. This would also lead to tech exports to other countries leading to the development of Pakistan’s IT sector.
This initiative began on 2nd December 2020, when the Government of Pakistan passed an ordinance to develop Special Technology Zones Authority (STZA) in Pakistan, with the purpose of entering Pakistan into the globally exploding Information Technology sector.
Imran Khan is himself overseeing the progress by serving as the president of the Board of Governors of the STZA. On December 17th, the premier appointed a global strategist, IT executive, and entrepreneur Amir Hashmi as the chairperson for the STZA.
Initially, the government has decided on building Special Technology Zones (STZs) in Lahore, Karachi, Islamabad, Quetta, and Haripur.
According to Mr. Hashmi, this initiative could be equivalent to CPEC in terms of a strategic game-changer for Pakistan.
This is a step to get a $15 billion share in a $5 trillion IT market globally. The plan is to set up 60 STZs all around the country.
The zones will have certain incentives for stakeholders as mentioned in the Ordinance, like:
- Exemption from all income taxes (withholding tax, presumptive tax) for a period of ten years from the date of issuance of a license by the STZ Authority.
- Exemptions from all customs duties and taxes on capital goods including but not limited to materials, plant, machinery, hardware, equipment, and software imported into Pakistan.
- Exemption from property tax for ten years from the date of issuance of a license by the STZ Authority.
- Exemption from general sales tax (G.S.T) on goods and services on import of plant, machinery, equipment, and raw materials for the consumption of these items within zones by the Authority as well as zone enterprises.
- Tax exemption on dividend income and long-term capital gains from investments in a venture capital (VC) undertaking for a period of ten years from the date of issuance of the license by the Authority.
- Supply of uninterrupted power and other resources.
- Guaranteed high-speed internet for the companies as well as the data centers which will be established inside the STZs.
Other than this, further incentives can be granted, subject to need.
It remains to be seen if the incumbent government’s initiatives actually manage to eradicate the gaps in the IT industry of Pakistan using STZs initiative it has taken, and that the growth of IT sector in the country is according to the promises made.