On the digitalisation of rural areas

September 26, 2021

Like most of Pakistan’s socio economic problems, the causes of lack of digitalisation in Pakistan’s rural areas demands a multivariate analysis

Source: pakistan gulf economist
Source: pakistan gulf economist

With the advent of the internet and communications revolution that arose from it, the world was brought into what was termed as the digital age. This digitisation of technology (the adoption of digital machinery over analogue) began in the 90s in the West, but in the three decades since it has expanded at an almost unprecedented rate. To describe this process of transformation, scholars have coined the term “digitalisation”. Unlike digitisation, which focuses on the adoption of technology, “digitalisation” is described as “the way in which many domains of social life are restructured around digital communication and media infrastructures.” Digitalisation is, therefore, not just merely adoption, but refers to the way that these processes mould and transform practices and attitudes across a certain area.

The last decade has seen a rapid uptake in this process of digitisation worldwide, a phenomenon that has been one of the few things that has been sped up under the coronavirus pandemic. According to Data Reportal, a website that provides statistical insights on digital media, in January 2020 there were over 37 million users within the country and an addition of 164.9 million people with an internet connection. Between 2015 and 2019, Pakistan’s IT sector experienced a 97 percent growth rate, with over 18.85 percent compound annual growth rate over the last five years, greater than all other industries. In the last decade, the IT industry saw a sustained revenue growth between 20 to 30 percent and is expected to reach $20 million by 2025. The country has, in the previous five years, seen the rise of e-service based companies such as Zameen.com, Careem, Uber, and Foodpanda (amongst a plethora of other businesses), from newcomers in the market to now market leaders.

In 2020, the country was the 46th largest e-commerce market globally with a net revenue of US$4 billion, double its worth (US$2 billion) in 2019. Clothing retail by far dominated the market, amounting to 70 percent of total e-commerce in 2020. According to a McKinsey Global Institute report, Pakistan’s e-commerce industry holds great potential for the country’s development, estimating a seven percent boost in GDP by 2025 and the creation of four million jobs in the process.

Amongst the factors that make digitalisation such an enticing phenomenon for investors, employers, employees and economists in the country is the ability for the industry to create jobs at a rapid pace and the impact that it has on the barriers to entry in any given industry. Take Careem as an example. The vehicle for hire company provides anybody with a car an opportunity to become employed, helping eradicate the serious issue of unemployment as well as incentivising the investment of money into other industries, in this case the vehicle industry. Pakistan produces over 20,000 IT graduates every year, with almost 70 percent of its 700 startups setup since 2010 still operational. The IT industry not only meets the needs of the local market but is also embedded deeply in the global value chain with the IT experts generating US$2.5billion worth of IT exports. Among this, US$1.2 billion is earned by the country’s online freelancers, who make up the world’s 4th largest freelancer community.

The boom in digital technology and services emanating from it has been extremely beneficial for Pakistan and the health of its otherwise struggling economy, particularly through the Covid-19 pandemic, where small business owners have been encouraged by circumstances to shift to the world of e-commerce in the absence of a viable physical marketplace. This has also been reflected in the Pakistani government’s willingness to provide subsidies and leniencies to potential investors in this industry. The GOP offered a 10-year waiver on corporate tax and imports of material needed for setting up tech zones and bringing in US$1.5 billion private investment to increase the IT industry’s size to as much as $6 billion, by catapulting global and domestic companies.

However, despite the plethora of opportunities within this industry and the government’s own inclination towards it, there are several hindrances in capitalising on the full potential of digitalisation. An example of this is the supposed resistance that the government has indicated through its attitude towards the presence of multinational tech companies in Pakistan. Services from giants such as Amazon, which provides potential job and marketplace opportunities to a range of people from wage workers in warehouses to manufacturers seeking a market for their products, are not yet functional in the country. Government regulations inhibit the inflow of funds within Pakistan, while simultaneously making it difficult for money to flow out of the country. The restrictions have led to the country receiving merely US$.06 per capita venture capital funds. To this day, Pakistan’s digital payments cover merely 0.2 percent of a total of 100 billion payments. The slow trajectory in the digitisation of payments can also largely be laid down at the feet of the ban on Paypal services in the country.

Additionally, and what might be the most troublesome issue out of these, recent studies by NGOs in the country have shown that while the effects of this increasing digitalisation are rampant in the urbanised centres of the country, the situation is much slower in the rural areas. This is a point of worry, not least because a high percentage of the country’s population resides in these rural areas.

Like most of Pakistan’s complex socio economic problems, there isn’t just one root-cause for lack of digitalisation in rural areas, rather it demands a multivariate analysis. The two leading causes that seem to emerge after a reading of the relevant data and literature seem to be the lack of digital infrastructure and facilities, and a lack of skill-based learning. The latter point can be clearly presented through a reading of the data rearing school completion.

Oxfam found that the 61 percent completion primacy school completion rate of all children who are enrolled into such institutions can be split further into 76 percent in the urban areas and 54 percent in the rural areas. This fact further demonstrates the disparity between the availability of training and education opportunities in the urban and rural areas of the countries. For upper secondary schools, this rate drops exponentially to 27 percent. These statistics mean that even if we were able to substantially improve the infrastructural condition of these rural areas, the workforce as it is, is not equipped with the skills to operate that infrastructure creating a more complex situation, that is “throwing money” at it won’t make the problem go away.

Meanwhile, populations in the rural areas are projected to go up at increasingly higher rates, currently at a healthy 15.4 percent, further compounding all of these issues. Adding to this, there are other sociocultural issues that also emerge out of a closer reading of the data. Out of the 55 percent of the rural population which does own a mobile phone with access to the internet, less than 30 percent comprises female owners. Currently, Pakistan is the fourth largest freelancing community supplying about 10 percent of online labour. However, because the work largely requires a high English level, rural youth, especially female rural youth, is often further marginalised.

The rural to urban migration rate, which at 40 percent (projected to go up to 50 percent in the next five years) is amongst the highest in the world, does not bode well for the country. The absence of digital infrastructure and practices in rural areas leads the job-seeking village person to venture out into the urban centres. Given that there are only a handful of urban centres in the country, this adds to the ever-increasing problem of overcrowding and overpopulation of the already existing centres. Inevitably, this leads to rising real estate prices, a stagnation in job availability, and most importantly, the wastage of human resources. All of this, without including the cultural and social impact that these mass migrations might have, with many of these rural areas being pillars of rural tradition and small-town values.

The answer does, unfortunately, lie in the almost redundant modern adage “educate the masses”. This oft-repeated mantra of social scientists, politicians and experts is a horse that’s been beaten far beyond death; however, it is one worth further qualification. Education should not simply infer literacy or merely concept-based learning, but rather should heavily include skill-based learning with a special focus on practical training. At a smaller scale, some universities in Pakistan have adhered to this further qualification, having created incubators. By partnering with Plan 9, a Punjab Information Technology Board (PITB) run technology incubator, 20 incubators including several hosted by universities like NIC LUMS and NUST TIC have been able to create a total of 1400 jobs, investing a total of US$5.8 million, and helping 180 start-up graduates.

However, at a larger scale and with particular focus on the rural population, the immediate concern of organisations and actors interested in the digitalisation of the rural areas should be the provision of digital infrastructure, facilities and training to these members of society. The agrarian-inclined rural population will then have the capacity to diversify their economy as well as substantially improve or assist the existing agrarian practices. The rural farmers can help find more customers by connecting to the market and accessing information through the internet and mobile phones. This skill-based learning model, coupled with policies that are more open to the development of the digital infrastructure – whether through government run projects or the lowering of barriers to entry for multinational tech companies, is the key to ensuring the digitalisation of the rural areas.

The writer is an editor and researcher with an undergraduate degree from the University of Buckingham. He can be contacted at sarangaamirriaz@gmail.com

On the digitalisation of rural areas