Pakistan has an enormous potential to grow in the digital industry but lacks exposure, training, and necessary education
akistan is considered a cash-based informal economy by the International Trade Association, where the majority of the transactions are made with cash. In this type of economy, experiencing the high growth of e-commerce is astounding, which raises the motivation to explore this market.
The e-commerce market has been reported to generate revenue of US $5.9 billion in the year 2021. In 2022, the projected revenue was the US $7.6 billion, which means that the revenue is increasing rapidly. The increase is because of the use of digital technologies during Covid-19.
On the other hand, Google in collaboration with partner organisations, has introduced Career Certificates along with 15,000 scholarships to bridge the gap between the youth and the digital sector.
Pakistan stands as a nation that has an enormous potential to grow in the digital industry but lacks exposure, training, and necessary education to impact the economy through technology. In Pakistan, digital leading organisations like Google, P@SHA, Institute of Rural Management (IRM), and Ignite have decided to play an important and crucial part in coaching young brains for building a career in technology.
It has been reported that digital technologies have the potential to create an annual economic value of Rs9.7 trillion (USD 59.7 Billion) by 2030. During the past decade, 20-30 percent annual revenue growth has been recorded in the ICT sector of Pakistan.
Let’s focus on the adoption of digital technologies and the gradual increase of cross-border provision of services which may have implications for the Asia region and should be complemented by active investment policies.
For economies in the Asian region to leverage foreign direct investment (FDI) into the digital sector, investment policy frameworks must alter and be embedded in the development strategies of national digital plans and services.
For the promotion and facilitation of investments, factors influencing investment decisions, such as physical infrastructure, regulatory frameworks, and ICT skills need to be considered in policies. A few of these have been identified as limiting factors, holding back FDI in digital services.
Improvements in the regulatory framework are dependent on staunch policy action. An important action is to define digital development strategies with established cross-sectoral plans for developing digital infrastructure, strengthening e-government, and promoting ICT skills and competencies. However, often digital strategies in Asia and the Pacific and other developing regions do not include an investment dimension with information on financing sources or policy instruments to facilitate investment.
Information on investment needs should go beyond digital infrastructure. Also, policy measures for business development through FDI have been effectively used in the Asia-Pacific region for the promotion of digital services. These include digital clusters, targeted entrepreneurship programmes, and digital special economic zones. Investment promotion agencies can be critical instruments to implement these models and align them with investors’ expectations.
A progressively important area for the FDI, particularly for digital services, is intellectual property rights. Building strong intellectual property protection is increasingly needed while acknowledging the different models and levels of progress.
Knowledge-intensive services that are digitally deliverable, such as cloud computing, data analytics, software development, or management or organisational knowledge may be increasingly dependent on solid intellectual property regulations to attract foreign investors. An investment policy framework for digital services should consider these aspects.
From a perspective of policy making, there are ample opportunities in the field of digital investments in Pakistan, dependent on the right policy and conducive environment for ease of doing business. Given Pakistan’s economic challenges, the US and China’s support is also crucial.
At the international level, most international investment agreements in Asia and the Pacific still do not tackle issues related to digitalisation or contain digital provisions. Factors on the scope and definition of the investment may not consider the coverage of intangible assets for digitally intensive firms.
As economies modernise their current international investment agreements, these aspects and consistency of the agreements, notably with regional trade agreements and the General Agreement on Trade in Services, will be increasingly important. The following four policy actions can help toward a sustainable digital investment policy framework.
Firstly, Institutional and regulatory frameworksmust align investment policy with national digital strategies and national digital plans; investment promotion planning should, thus, be fundamentally interlinked with investment policy planning.
It is mandatory to create an inter-ministerial body both at the federal and provincial levels, comprising public and private stakeholders involving services, the digital economy, and other relevant agencies to plan for and administer the digital services sector.
Streamlining regulatory barriers upholding digital services (e.g., phase out digital services taxes, facilitate the adoption of e-financial services and digital payments, and improve standards for e-health and remote education services) is required.
It is necessary to implement sector regulations and independent supervision to ensure a level-playing field, competition, and investor protection. It is crucial to emphasise again that strengthening intellectual property frameworks, including the legal framework for intellectual property rights is important.
Secondly, international investment agreements must include digital provisions that reflect economiccommitments and regulations. Pakistan must consider the definition of investment provision in international investment agreements to cover intangible assets and other relevant assets for digitally-intensive firms to ensure regulatory convergence with multilateral investment and trade commitments and the GeneralAgreement on Trade in Services.
Thirdly, skills and competencies development required collaboration across sectors to provide integrated solutions for small and medium-sized enterprises (SMEs) or industries lacking a trained workforce to lead transformations from the inside.
The Higher Education Commission (HEC), the Ministry of Information, Telecom and Technology (MoITT), and the Ministry of Planning, Development and Special Initiatives (MoPD&SI) must enhance digital skills in curriculums (e.g., computer skills, basic coding, digital reading).
The private sector stakeholders must focus on talent mapping to showcase specialised local capacities for potential foreign direct investors. Investment in large-scale upskilling programmes, collaborating with the private sector playersis also important. Design online courses and flexible and affordable options for distance learning.
Fourthly, digital infrastructure must accelerate investments to improve international, national, and urban digital connectivity.The government must improve regional coordination for digital infrastructure investment. Another step can be of digitising government services (e.g., online applications for permits, e-tax filing) which already exist but the focus should be on enhancing the capacities of the users.
Lastly, clusters for digital services (innovation, financial instruments, entrepreneurship programmes) are crucial for enhancing digital innovation hubs, incubators, and accelerators to promote business development plans and offer technical expertise and experimentation facilities for digital service investors.
Consider fiscal incentives and strategic support to digital services sectors, particularly those investingin local innovation and job creation. In coordination with investment promotion agencies and other bodies, public-private partnerships can be effective in the introduction of digital technology parks, software parks, innovation districts, and a digital-free trade zone under the CPEC Digital Silk Road.
From a perspective of policy making, there are ample opportunities in the field of digital investments in Pakistan, dependent on the right policy and conducive environment for ease of doing business. Given Pakistan’s economic challenges, the US and China’s support is also crucial for any financial assistance from international institutions to uplift and revamp the digital realm of Pakistan.
The writer is a researcher associated with Centre for Private Sector Engagement at Sustainable Development Policy Institute (SDPI)