In under six months, the SIFC has driven remarkable changes in the IT sector, achieving a 13 percent growth in exports, establishing e-Rozgar centers, ensuring 5G spectrum availability, and inaugurating the Pakistan Startup Fund, showcasing significant progress and potential.
The Special Investment Facilitation Council (SIFC), since its inception in June 2023, has made significant strides in terms of achievements and success, considered unattainable even a decade ago. The primary credit goes to the determination of the Government of Pakistan to pull the country out of the debt crisis and fiscal uncertainty. When SIFC started in 2023, it embarked on a challenging path marked by obstacles, ditches, and quagmires. In its early stages, taking cautious steps, SIFC focused on sectors that, if given attention, could lead to quick achievements and accomplishments—the low-hanging fruits. The initial emphasis was on five sectors: agriculture, information technology (IT), energy, mineral and mining, and defense. Later, the scope was expanded to include privatization and tourism.
In the IT sector, SIFC has taken revolutionary steps to transform the prevailing environment, turning it into a vibrant and dynamic industry under the leadership of the caretaker Federal Minister for Information Technology and Telecommunication, Dr. Umer Saif (Tamgha-e-Imtiaz). Dr. Umer mobilized the sector, making it agile and aligning it with modern system requirements, thereby positioning Pakistan as one of the most sought-after technological destinations for international investors. The minister adopted a systematic approach by first identifying shortcomings and pitfalls in the system through proper research and analysis. Based on the recommendations of the analysis report, he recognized the sector's current standing, capabilities, and potential, working to capitalize on its qualities and abilities. These efforts, coupled with unwavering support from SIFC, facilitated a quick recovery for the sector, leading to a 13 percent growth in IT and IT Enabled Services (ITES) exports for Pakistan.
The government aims to position Pakistani startups as significant players on the global stage while reaffirming the vision for a technologically advanced and innovative Pakistan; it invites and inspires stakeholders to participate in this transformative journey with the Pakistan Startup Fund.
IT Ecosystem
With the advancement of technology and artificial intelligence (AI), IT has become indispensable in every field of life, whether business, industry, services, or academia. Let’s see the current IT environment as an ecosystem. In the Pakistani environment, the IT ecosystem should look like this:
The leading groups constituting the IT ecosystem include the public sector, the private sector, venture capitalists (foreign investors expected to bring business into the country), academia (responsible for providing training and education compatible with international standards), startups (creating job opportunities), and the online workforce (mainly freelancers contributing to the country's revenue). In the past, all these groups and entities faced various challenges and difficulties that required addressing.
The Predicament
The main problems and difficulties identified, which were detrimental to the growth of the IT sector in Pakistan, included the following:
▪ The Absence of IT Skills Compatible with International Standards. It is ironic that for over a decade, more than seventy-five thousand students have graduated annually in IT and related subjects, yet very few have secured respectable jobs or initiated startups due to a lack of quality education aligning with international standards. This leads to a waste of time and effort. Recognizing the need for a standardized training and testing system, it was realized that improving the quality of graduates could enhance their contribution to the national exchequer by excelling in the IT sector.
▪ Repatriation of Money in Dollars. Another issue that hinders investment in the IT sector relates to the right of foreign investors to repatriate their profits and utilize them in the expansion of their businesses–a very natural and logical demand. It was realized that allowing the investors to repatriate their profits can increase their confidence and increase investment.
Considering the job creation ventures under Ignite, more than one hundred and twenty-eight thousand jobs have been created through NICs, significantly contributing to the economy. These jobs committed investments worth more than twenty-three billion rupees in investments and generated a revenue of more than sixteen billion rupees.
▪ Security of Investment of Foreign Investors. Owing to the lack of continuity of policies, the investors, especially the foreign investors, are reluctant to invest in any venture in the country, let alone the IT sector. To restore investors' confidence in Pakistan, there is a need to reassure them that their investment is safe and their business has the potential to progress and expand without untoward intervention at the government level. Ensuring incentives will further improve their confidence.
▪ Availability of Working Space for Freelancers. The majority of freelancers in Pakistan earn a maximum of ten to fifteen dollars a day. With this meager income, they struggle to cover routine expenses such as owning or renting a workspace, maintaining a laptop suitable for job requirements, acquiring training for desired specialties, or even securing an uninterrupted internet connection. Recognizing the urgent need, there was a call to provide freelancers with workspaces for necessary training, allowing them to work comfortably, earn a living without hassle, and grow their businesses.
The Way Out
Considering the sector's potential and the opportunities it presents for startups, the caretaker IT Minister, Dr. Umar Saif, introduced the PSF to support and facilitate business initiatives and startups in the country. Under the new program, the government has pledged to contribute up to 30 percent of the Venture Capitalist's (VC) investment as a grant to startups through the PSF, without claiming any equity or position on the board.
It was a dream that was not easy to realize without the support of the government and the SIFC. The government's underwriting of risks for VCs illustrates its commitment to fostering a robust startup ecosystem. With an investment of PKR 2 billion leading to a valuation of PKR 50 billion, this initiative aims to bridge gaps. The government's objective is to connect innovative startups, VCs, and investors, expecting to significantly boost economic growth and innovation in Pakistan.
Against the investment of up to 30 percent of the required funds of a startup, the government or the fund will not claim equity or a position on the board of the company. Dr. Saif said the 30 percent share of the government will be treated as grants for the startups and succeeded in getting at least 70 percent of foreign investment. The government assures continued support from the Ministry of IT and Telecom for technological innovation and entrepreneurship.
The government aims to position Pakistani startups as significant players on the global stage while reaffirming the vision for a technologically advanced and innovative Pakistan; it invites and inspires stakeholders to participate in this transformative journey with the Pakistan Startup Fund. Through this initiative, the government is envisioning a future where Pakistani startups are synonymous with innovation, growth, and global success.
In Pakistan's startup ecosystem, over eighty incubators are operational nationwide. More than thirty-five Business Incubation Centers (BICs) are functional in various universities and government installations. A network of eight National Incubation Centers (NICs) is currently supporting startups, and more than four thousand startups are a clear indication of a vibrant entrepreneurial landscape in Pakistan's IT sector.
Concerning the investment landscape, around USD 750 million were invested in Pakistani startups in 2021 and 2022. The IT sector witnessed notable funding successes for startups such as Bazar, Dastgyr, and Retailo, securing USD 70M, USD 37M, and USD 36M in funding in 2022. Additionally, startups like MyTM, Encorepay, e-bike, and Farmdar have garnered substantial seed funding, highlighting the potential of NIC-incubated ventures.
Considering the job creation ventures under Ignite, more than one hundred and twenty-eight thousand jobs have been created through NICs, significantly contributing to the economy. These jobs committed investments worth more than twenty-three billion rupees in investments and generated a revenue of more than sixteen billion rupees. Around one thousand and five hundred startups have been incubated, supported by around two hundred mentors, effectively demonstrating the NICs' efficacy.
Achievements of the Last Six Months
In a span of less than six months, under the umbrella of SIFC, the caretaker government has brought revolutionary changes and improvements in the IT sector. A glimpse of the achievements in the IT and Telecommunication sector includes the following:
▪ Thirteen percent growth in IT and ITES exports.
▪ Provision of particular foreign currency accounts for IT services firms and IT companies.
▪ Standardization in IT testing systems through requisite training for more than two hundred thousand university graduates.
▪ Establishment of e-Rozgar centers across the country with a capacity of one hundred freelancers each, with a projection of enabling more than one million jobs.
▪ In the telecommunication sector, ensuring the availability of 5G spectrum.
▪ Finalization of national policy for high-speed internet fiber across the country.
▪ Finalization of National Space Policy and telecom infrastructure sharing policy.
▪ Inauguration of Pakistan Startup Fund and starting of startup exchange program.
These are just a few significant achievements in the IT and Telecom (IT&T) sector, that prove we can reach any objective we strive for with grim resolve, dedication, and continuous efforts.
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