Pakistan can learn from peers to boost startup ecosystem: OICCI report

LAHORE: Pakistan has the potential to develop a thriving startup ecosystem, but it needs to learn from the experiences of several peer countries that have successfully overcome hurdles, according to a report by the Overseas Investors Chamber of Commerce and Industry (OICCI).

The report, titled “Promoting Start-up Ecosystem in Pakistan - OICCI's Prospective”, identifies the key challenges and opportunities for Pakistani startups, and offers recommendations on how to improve the enabling environment for them.

The report says that Pakistani policymakers can adapt and implement best practices from countries such as Rwanda, Chile, and Kenya, which have created conducive conditions for startups to flourish.

"The OICCI does not recommend simply copying another country's model as that may not be effective. Instead, we can learn from ... examples, tailor ... ideas to Pakistan's specific context and challenges, and then move forward with the implementation," it said.

Abdul Aleem, secretary general of OICCI, in a letter to Dr. Umar Saif, minister for IT, shared the contents of the report, saying that the startup ecosystem in Pakistan is an emerging and promising one, with a large and young population, a growing middle class, and improving digital infrastructure.

However, it also faces many challenges, such as limited access to funding, regulatory and operational hurdles, and shortage of talent and skills.

"Startups in Pakistan especially struggle to raise capital from both local and foreign investors, due to the low level of venture capital activity, absence of a robust angel investor network, limited seed funding options, economic downturn, political instability, and negative perception of the country’s security situation," it added.

"This scarcity of funding is felt significantly at the early stage (ideation and seed) and poses a significant hurdle for startups. Besides hindering the growth and scalability of the businesses, this is also resulting in project delays or even cancellations."

Startups in Pakistan have to deal with complex and cumbersome procedures for registering, licensing, and taxing their businesses, as well as complying with various laws and regulations that may hinder their innovation and growth. The prevalence of outdated administrative hurdles in establishing businesses and the complex Intellectual Property Rights (IPR) procedures required to achieve a patent are among the primary hurdles faced by Pakistan's startup ecosystem.

The positive thing about Pakistan is that over 60 percent of its population is below the age of 35, with over 25,000 IT and engineering graduates annually, making it a fertile ground for cultivating a thriving startup ecosystem. However, there exists a considerable disparity between the skills taught in the educational institutions and the practical necessities of managing a business.

Many schools and universities in the country favor a traditional rote-learning method, which discourages critical thinking, creativity, and problem- solving abilities – crucial qualities for aspiring entrepreneurs. This mismatch contributes to a shortage of competent and well-informed entrepreneurs and employees, especially in the fields of technology, engineering, and management.

Infrastructure limitations, including unstable electricity supply, inadequate technological infrastructure, and limited access to resources, can impede the development and operations of startups. Suboptimal training curricula, insufficient networking opportunities for early-stage startups, and a lack of dedicated attention to the needs of startups operating in a specific niche also impede the growth of startups.

A collective approach, led by the government and implemented by the private sector, can help Pakistan reap its potential in the IT sector. For this purpose, the government needs to ensure access to capital, helping startups connect with potential investors, such as angel networks, venture funds, or crowdfunding platforms.