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Digital Pakistan – an ambitious goal?

The world is changing day by day, opening doors for the new ideas and innovations. One of the hottest topics that we come across nowadays is Digital Transformation. It is the amalgamation of digital technology into day to day activities of our lives, also known as internet of things. It is continuously transforming our lives and reforming the way how things were done, hence creating more value for the people.

However, the true potential of digital technologies is not being leveraged across the countries uniformly. South Asian region lies on the lower end of global connectivity spectrum. If this region successfully develops their digital economy, the multiplier effect would be tremendous, leading to significant improvement in the lives of all the citizens.

As a developing country in the process of digitalization, there are both drivers and bottlenecks on the path to the creation of a digital Pakistan. Currently, as per the ICT development index 2017 which ranks 176 countries on digital connectivity indicators, Pakistan is ranked at 148. While digital transformation is rapidly moving from theory into practice, there is much work to be done.

Pakistan is on the cusp of a digitization drive. Rarely has a new technological approach held so much promise and potential. Pakistan has seen great improvement in IT/Telecom infrastructure and connectivity, e-commerce, e-governance and services delivery, digital finance, education and agriculture sectors that has exerted a beneficial socio-economic impact.

To understand the current state and future of digitization in Pakistan, it is important to examine the SWOT analysis for its digital transformation.

Strengths
  • The total number of mobile phone subscribers has reached 151 million by 2018, accounting for 73 % tele-density.
  • 59 million individuals are 3G/4G subscribers with total internet subscribers at 62 million.
  • Google, in a study, projected Pakistan as quickly becoming a digital-first country expectedly the fourth fastest growing digital economy by 2030.
  • Sales of local and international e-commerce merchants reached Rs40.1 billion in FY18 compared with Rs20.7 billion in FY17, a remarkable growth of 93.7%.
  • There are 905 e-commerce merchants registered with banks in 2017 as per a State Bank of Pakistan report.
  • Telecommunication industry is dominated by few players that have the ability to finance and develop advanced services.
Weaknesses
  • Pakistan’s digital participation metrics are currently lagging behind regional economies as it ranked 31 out of 34 countries in ICT Development Index with around 156 million people still without internet.
  • Relatively high levels of taxation and fees applied to mobile sector, impacting the end user price. This acts as a significant barrier to digital inclusion.
  • 80-90% of the e-commerce transaction are cash on delivery (COD). Thus, a need to move from COD to more formal mobile based and online secure payment gateways.
  • Weak legal framework to prevent fraud and lack of policies for consumer protection.
  • Inter-regional connectivity among the South Asian region is still a challenge.
Opportunities
  • 5G being introduced in Pakistan this year.
  • Under CPEC, China has planned the installation of fiber optics and satellite Internet connections in remote areas of Pakistan, this will help to enhance the internet user density.
  • China is willing to transfer some of its industries to Pakistan, one being assembling of mobile phones and laptops. Both products have tremendous demands not only in Pakistan but also abroad.
  • Ignite National Technology Fund is funding some of the most innovative IoT projects.
  • E-commerce activities have the potential to expand in rural areas as 35% of cash on delivery transactions were from outside urban cities.
  • ‘Digital Leaders’ in businesses are earning 23% higher revenue, 85% more market share and 80% increase in profitability.
  • Pakistan enjoys a privilege based on its digitally-savvy youthful demographic profile with median age is 22 years and almost 64% of the population is below the age of 30.
  • Creating special economic zones for IT can create employment opportunities for an additional 100,000-300,000 knowledge workers.
  • Pakistan can likely save $5 billion which is lost in under-invoicing or mis-pricing annually by signing electronic trade data sharing agreements with trading partners.

Threats
  • Pakistan continues to face social exclusion because of existing digital divide as 59.7% segment of population (that is 120 million people) remains outside the reach of digital services.
  • A key challenge that we face is low literacy rate, which restricts the penetration of digital services and limits the scope of their transformative potential.
  • At the national level, cyber security action plan to counter threats is missing. Recently, two commercial banks in Pakistan were attacked. Their accounts were accessed from five different countries and the money was siphoned out.
  • Major gap in ICT infrastructure.
  • Roughly, 20% demand-supply gap between graduates and IT industry needs.
  • Barriers for transnational e-commerce such as being in grey list for Financial Action Task Force.
  • Dominance of cash on delivery in e-commerce and prepaid mobile services leading to informal transactions.
  • The idea of change itself acting as a barrier as people and entities are traditionally maintaining less technology savvy culture.
Way forward
  • A comprehensive digital transformation plan should be developed using a cross industry stakeholder consultative model. This should outline proper tools and processes related to connectivity, security, licensing, quality of services etc.
  • Higher rates of general literacy are essential for building a mature digital technology workforce and the next generation of entrepreneurs. Transdisciplinary education with focus on ICT will be a key driver in enabling the digitization of Pakistan’s economy.
  • Investment in infrastructure emphasizes a deeper penetration of digital connectivity that will enhance the effect of the transformation and create more widespread synergies to yield short-term benefits as well as in redefining long-term possibilities. This includes a deeper penetration of 4G/5G connectivity in rural areas. This also includes cyber security infrastructure and processes for sustainable growth of the digital economy.
  • Adopting a digital first mindset that encourages digital engagement approach through a clear and concise regulation regarding taxation of e-commerce, ease of financial transfers both domestic and abroad, promotion of identity verification systems and other efforts to facilitate digital services and platforms.

Government of Pakistan is truly committed to make this vision a reality though achieving this ambitious goal needs proactive engagement that can drive truly transformative change in Pakistan. The emergence of a digitally empowered population and economy, however, hinges on the effective integration of digital services, innovation, and an entrepreneurial spirit.In this time and age, focusing on digital literacy, e-education and digital entrepreneurship will not only reduce inequalities, create jobs and boost the economy but will also give Pakistan a fair chance to compete with other regional economies.

The writer is a Research Associate — Sustainable Development Policy Institute (SDPI)

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