TELECOM SECTOR KEEPS MOVING NORTH-WARDS
THE OTHER SIDE OF THE COIN
SHAMSUL GHANI (email@example.com)
May 12 - 18, 2008
Foreign investment in Pakistan Telecom sector during the period July to December, 2007 has been to the tune of $ 1.314 billion as against $ 1.225 billion during the same period, previous year. During the last four years, the sector has attracted more than $ 5 billion as foreign direct investment. A number of foreign telecom companies have entered the highly competitive Pakistan market to offer a wide range of service products. The continued entry of market players and the rising heat of competition have resulted in windfalls to the subscribers who are enjoying varieties of services at easily affordable prices with an option to swiftly switch over from one brand to another.
As in India, the fast pace telecom sector is making its mark on a smaller economy like Pakistan. India has presently more than 200 million mobile phone users with a potential to move to 500 spot within a period of five years. Pakistan has a 60 million base of cell phone subscribers in addition to over 6 million land lines. Cell phone market in Pakistan has increased almost fifteen fold since 2000. Pakistan was honored with the covetous Government Leadership Award of GSM Associates in 2006.
Top mobile phone operators in the country are Mobilink, Ufone, Telenor, Warid, Instaphone and China Mobile (Previously Paktel). Popular cell phone brands are Nokia, Sony Ericsson, Motorola, Samsung and LG. Recently the local market has seen influx of the low cost Chinese versions of these brands. Notwithstanding the legal implications of the issue for the marketers, the local users are making good use of an attractive proposition.
The boom, the telecom industry has experienced, would not appear so promising when seen from another angle. Only a portion of foreign direct investment is utilized in the setting-up of infrastructure facilities, while the rest is spent on marketing efforts. The size of resultant capital formation does not reflect the size of actual FDI. Moreover, a major portion of FDI finds its way back to overseas in the shape of import cost of telecom equipment and cell phones.
During 2006-07, $1.8 billion were paid off as import cost of telecom equipment and cell phones - 17% more than the previous year. With the telecom sector vying to move still on and the subscriber base bound to reach the 100 million mark, the import bill for telecom equipment is likely to assume a threatening size thereby further widening our trade deficit gap. To make the growth meaningful, the foreign manufacturers will have to be attracted to set up their facilities in Pakistan to ensure much needed capital formation and technology transfer. Besides reducing our import bill, the setting-up of indigenous manufacturing facilities, will also create job opportunities and upgrade our electronic engineering skills. Some allied industries will also benefit from this big technological change.
PROBLEMS FACING THE TELECOM INDUSTRY
The telecom sector faces a host of challenges requiring immediate attention of both public and private sectors. They must act in concert to take care of the following problems:
1. Achieving a high tele-density rate.
2. Expanding the network to rural areas.
3. Improving on service standards.
4. Establishing data ware houses and international call centers.
5. Ensuring network security
6. Setting up facilities to manufacture indigenous telecom equipment and cell phones.
Setting-up of indigenous manufacturing facilities for telecom equipment and cell phones may sound very heart-warming, yet it will take a lot of doing from both the private and public sectors. While attractive fiscal and monetary incentives can be designed and offered to the foreign manufacturers off hand, the questions of proper infrastructure facilities, outage-free energy supplies and law and order situation will always be there to haunt the policy makers. Since electronic engineering relies heavily on a state of art technology, the foreign investors can not be wooed simply by the word of mouth. Their partnership with us shall have to be built on some concrete grounds. They won't risk their dollars in flimsy ventures.
The private and public partnership idea becomes quite relevant in this situation. The private sector should put in necessary investment to develop infrastructure and the public sector should focus on an early completion of hydro and coal-based energy projects, as the energy produced by IPPs is not cost effective.
Like other sectors (especially textile), the telecom sector too faces threats of globalization and we need to take some serious measures to remain competitive. In the given situation, our strength is our human resource and our weakness is education. This industry has little room for unskilled and uneducated labor. It thrives on well educated people, intellectuals and creative minds. To prepare ourselves to face the threat of competition, we will have to increase our literacy rate to provide suitable raw material to the telecom and IT industry. Instead of wallowing in the mud of lop sided economic growth based on an out of proportion blow-up of service sector, we should sound a wake-up alarm and do something concrete to broaden our industrial base.