Digitisation can significantly boost the GDP growth rate and expand the size of the country’s economy. A report on Pakistan’s digital journey, Recommendations for Digital Transformation in Pakistan, argues that digitisation has the potential to add $60 billion to the economy by 2030 if the government creates a favourable investment climate for local and foreign investors to fill in the large gaps in digital infrastructure and connectivity.

The report prepared by the Overseas Investors Chamber of Commerce & Industry (OICCI) covers wide-ranging suggestions to boost digital infrastructure and connectivity, e-governance, e-commerce, EdTech, Fintech, AgriTech, HealthTech, IT exports and Web 3.0 technologies.

It quotes international research that a 10 per cent increase in broadband penetration increases the GDP by 1.38pc.

“Digitisation offers innovative employment prospects to the 23pc of Pakistan’s population falling in the age group of 20-34 years. This report offers key proposals for the policymakers on various aspects of digital transformation of the economy,” OICCI chief executive and secretary general Abdul Aleem told this correspondent.

Internet penetration in Pakistan has increased to 49pc, but almost half of the market is still on 2G with an average download speed of 14.9 Mbps versus the South Asian average download speed of 17.3 Mbps

Recent global experience shows that the countries that have adopted digital technology and bridged digital connectivity gaps have grown more rapidly than their peers and increased their global competitiveness. Currently, Pakistan ranks 90th out of 120 countries on the Inclusive Internet Index and 110th among 140 countries on the Global Competitiveness Index.

“One of the biggest challenges facing Pakistan’s digital economy pertains to the inadequate digital infrastructure,” argues Mr Aleem. “Pakistan lags behind other regional countries when it comes to digital infrastructure and mobile connectivity, impeding efforts to exploit the potential of digital technology fully.”

Internet penetration in Pakistan has increased to 49pc, but almost half of the market is still on 2G with an average download speed of 14.9 Mbps versus the South Asian average download speed of 17.3 Mbps.

The report points out that limited optic fibre coverage is the root cause for slow and limited internet, with only 9pc cell towers connected to optic fibre compared to the international benchmark of 40pc and the regional comparison of 80pc in Malaysia and 90pc for Thailand.

Digital gaps become quite obvious across rural-urban and gender divides and within the major cities depending upon the socio-economic profile of the areas.

“Remoter regions and rural areas have a limited footprint in terms of fixed broadband services, which differ within cities according to the socio-economic profile of each region. Pakistan has a paltry 1pc penetration rate of optic fibre compared to regional peers like Vietnam with 44.5pc and Malaysia with 32.1pc,” it says.

The absence of true market competition, with the PTCL holding 70-75pc market share (until 2020), higher licensing fee, taxes and duties and challenges in the right of the way serves to hamper the local development of optic fibre and are proving to be major disincentives for the efforts to increase the capacity of the operators.

Quoting the report, Mr Aleem believes that digitisation can help the inclusion of the underserved population of society. “Around 23 million children are out of school and we have less than one physician for every 1,000 people in Pakistan. To help Pakistan overcome these issues it is important to digitise the education and health sectors.”

The report notes that in recent years there has been tremendous development in Digital Financial Services. But Pakistan is still a cash-based economy with less than 5pc merchants accepting digital payments. Besides promoting digital modes of payments, the government also needs to encourage international e-commerce companies to set up regional offices in Pakistan.

“Indonesia worked on similar lines, and now its e-commerce market size has grown to $30bn. It is now expected to reach $54bn by 2025 and supports 26m jobs directly and indirectly,” it underlines.

Further, digitisation can bring a lot of efficiency to government services, boost productivity and help improve ease of doing business (EODB).

“Philippines can be a good example where public service delivery was digitised under the E-government Master Plan (EGMP) that has helped the country, ranked 95th in EODB 2020 rating, register improvements of 29 notches. Our government should take advantage of modern technologies such as Machine Learning, Data Analytics and Artificial Intelligence to improve competence in public departments, document the economy and increase the tax revenues,” the OICCI recommends.

In order to promote the digitisation of the economy and reduce the connectivity gaps, the report recommends tax, financing and regulatory incentives for investment in the local production of mobile phones and optic fibre for creating jobs as well as boosting digital connectivity and infrastructure. More importantly, the report suggests that the government should focus on expanding 4G technology ‘for all’ rather than 5G ‘for few’.

At present, 4G penetration stands at 47pc whereas the countries that have commercially launched 5G first achieved around 70pc or more 4G penetration. It proposes that the government reduce spectrum prices for mobile network operators to encourage them to invest in infrastructure to improve quality and data speed.

“Revenues could be collected over time rather than all at once.

Besides, the government should allocate maximum spectrum to the operators for internet usage to achieve the goal of digital Pakistan besides charging spectrum prices in home currency rather than dollar-denominated.

“Additionally, the government should consider having sufficient redundant cables to meet the growing demand and address unforeseen circumstances. An enhanced effort to incentivise investment into developing submarine cable infrastructure is required to ensure network redundancy and to cater to increased data rate demands,” the report suggests.

While Pakistan’s mobile market has significant potential, current levels of mobile internet adoption, smartphone adoption and digital services are unable to support the efforts to exploit this potential without improving and expanding digital infrastructure to catalyse the growth of a digital revolution in Pakistan.

Published in Dawn, The Business and Finance Weekly, April 10th, 2023