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Venture capital for IT sector

SBP Governor Dr. Ishrat Hussain feels venture capital can be instrumental in rapid growth of IT sector in Pakistan

Apr 02 - 08, 2001

Dr. Ishrat Hussain, Governor State Bank of Pakistan (SBP), who is keen to see a rapid growth of Information Technology in Pakistan, has said that significant financial decisions have already been taken while more are in the pipeline to facilitate this industry.

The governor, who was especially invited by Dr. Hafeez Shaikh, the Chairman IT Board and the provincial minister for finance to make concluding remarks at the closing session of the 2-day ITCN Asia 2001 conference held in Karachi last week.

The IT sector has a strong public private sector combination as the government has decided to play the role of facilitator to this industry instead of being the controller.

Efforts are being made to provide a strong infrastructure base to this emerging industry in collaboration with the local and foreign IT players. As far as the financial help is concerned, the government has allocated substantial amount of finances to facilitate software exports at the subsidized rates under the IT policy, the SBP chief observed.

He said that Pakistan has a strong English speaking and cost effective group of IT professionals having capacity to serve at the higher end of this technology. Being one of the fastest growing IT markets in the developing world, Pakistan has enough to offer to the international investors.

Dr. Ishrat Hussain endorsed that without availability of adequate venture capital it may be difficult to achieve the faster and targeted growth hence to attract international investors having enough funds to provide venture capital for IT projects in Pakistan is the need of the hour. So far the concept of venture capital is a dream of IT sector in Pakistan as the financial sector strictly follows prudent rules. Most of the youngsters having potentials to rise in the IT sector are unable to avail financial assistance from the banking sector as they do not have any collateral to offer except the intellectual property which is not duly recognized by the financial system to accept it as collateral for extending advances.

The young IT professionals deserve for a good chance, hopefully they would not betray to the banking sector as did by a large number of wilful defaulters in the manufacturing sector.

It may be noted that the Pakistan Software Houses Association (PASHA) has strongly recommended to the Ministry of Science and Technology to treat this sector with exceptions to the existing prudential regulations in the banking sector. PASHA has cited the example of the United States where the entire IT sector has emerged with the support of venture capital investors.

Taking an overview of the existing state of IT sector in Pakistan, Dr. Ishrat Hussain said that Pakistan has the raw material in the shape of IT professionals. The only thing required is the mature leadership, which can translate this available raw material into the finished products.

In order to attract venture capital and transfer of technology we have to seek joint ventures and assistance from international IT players, he suggested. Another important area we are lacking, the governor pointed out, is the Research and Development (R&D). Changes are taking place almost every day in this cutting edge technology hence matching efforts would be required to catch up the pace of development around the world. This could only be possible when we spare time and money for R&D sector. Since it's a costly affair we should also look for the companies which have and are doing a great deal of efforts towards R&D.

He said that Pakistan offers great business opportunities both to the local and foreign investors in IT sector. He mentioned government plans for e-governance, automation and infrastructure developments offering massive business opportunities in Pakistan. The governor was of the view that Pakistan IT sector has a good future to meet our economic targets. The ITCN Asia 2001 is just a beginning and may prove a turning point in the economic history of Pakistan.

The governor Balochistan, Amir-ul-Malik Mengal, who also spoke on the occasion expressed the hope that the promised miracles of Information and communication technologies would help in leapfrogging nations to bring a better life to their citizens.

He said it is a result of a new wave of accelerated development in Pakistan's IT landscapes. Quetta, the provincial Capital is being connected with the national fibre optic backbone. PTCL is playing an instrumental role in connecting other parts of Balochistan with international IT systems. He said that places like Turbat, Khuzdar and Gwadar are soon to be provided Internet access. Balochistan, a large land mass full of precious natural resources with scattered population lacks civic facilities. The governor Balochistan expressed the hope that deployment of new technology would bring province into the national mainstream but would also help bring people in touch with economic opportunities in other parts of the country as well as close interaction with the people from rest of the world.