Tech-Based Transitions: Incentivise Adoption
Founder & CEO Katalyst Labs, Former President of P@SHA, Member PM’s Advisory Board on IT & the Digital Economy
A lot of good work has happened in the startup ecosystem during the last 10 years. Investments did decrease as they did elsewhere in the world and valuations came down to more realistic levels, but investors did not actually leave. Since Pakistan is the largest growth market that is yet to be tapped so it is natural that there will continue to be a great deal of interest. But there needs to be more policy action, instead of lip service and verbal jostling.
As is true for any industry, those actively taking initiatives are the ones fuelling the startup ecosystem of Pakistan. The amount of startup investment this year stands just north of $328 million, which eclipses the amount raised the year before it. Additionally, if we’re to find comfort in visibly apparent progress, this number is not much lower than what the ostensibly stable Egyptian startup ecosystem has also raked in, signalling that it is not all doom and gloom.
Furthermore, how we react to global challenges will also dictate how we fare. For starters, we can find strength in working closely with venture capital (VC) firms, startups and tech companies from MENAP and APAC regions. Not only will this facilitate a flow of information and support both ways, it will also open a market for Pakistani tech exports to stake their claim abroad. A testament to this would be the Cloudways acquisition by DigitalOcean for $350 million, a sale that signals the largest-ever acquisition from Pakistan.
There are also other encouraging instances of our IT industry scaling and exports growing when the right policies are in place; the SECP announced the registration of 2380 new companies, of which 347 were IT in November, 2022. However, it is important to ensure that tax policies, investment in training initiatives, as well as the ability for tech companies, startups and investors to transfer money across borders, is facilitated.
Digitising Pakistan requires government departments to speed up the process of adoption and deliver services not just in major cities but across second and third tier cities, as well as towns and villages. Although Fintech, agritech, gaming, healthcare, edtech, e-commerce, retail and government services are all on a growth trajectory, awareness and education on the use of technology will remain key towards digitising the country.
There are reservations within the IT sector and the startup ecosystem that progressive initiatives may not go through for a number of reasons – like reduced tax incentives for export-based businesses and restricted transfer of funds across borders. This will impact businesses negatively with some players already looking at moving their businesses to friendlier destinations. For players in the IT sector to walk away is not difficult, as all they have to do is pick up their laptops, get on a plane and move. The loss would be for the country, both in revenue and employment.
I foresee an uncertain period of 6-12 months for most tech companies in 2023, leaving a great number of entrepreneurs and professionals very despondent.