Unlocking Pakistan’s Digital Potential – A report by Google and AlphaBeta

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Unlocking Pakistan’s Digital Potential

Press ReleaseGoogle and AlphaBeta released a report (“Unlocking Pakistan’s digital potential: The economic opportunities of digital transformation and Google’s contribution”) which sizes the potential economic value of technology applications for Pakistan and identifies key actions needed to capture this opportunity.

Key points

Pakistan’s vibrant technology sector has grown significantly in recent years and is well-positioned for further growth.

The country is home to more than 300,000 Information Technology (IT) professionals, produces over 25,000 Information Technology (IT) graduates annually, has nurtured over 700 tech start-ups since 2010, and has the fourth-highest-earning IT workforce in the world. Pakistan’s technology sector also has a large export element, with annual revenue from exports of IT and IT-enabled Services (ITeS) accounting for over USD2.1 billion in 2021 – which has grown at around 15 per cent per year since 2010.

In the past year alone, exports of IT and ITeS have increased by 47 per cent, driven by the COVID-19 pandemic which boosted the reliance on technology. Exports are expected to continue growing to reach USD3.5 billion in 2022. Furthermore, the government has identified the creation of a holistic digital ecosystem – most prominently in its “Digital Pakistan Policy” – as one of the key levers of economic growth.

Despite these significant achievements, the country can go further in its digital transformation journey.

Pakistan’s online population has grown rapidly at 68 per cent per annum from 2016 to 2019, and the Internet penetration rate reached 54 per cent in 2021. However, the country faces several hurdles to full digital transformation. For example, the World Economic Forum’s “Global Competitiveness Index 2019” ranked Pakistan as 73rd out of 141 countries on the ability of the active working population to possess and use digital skills.

Ensuring that all firms benefit from digital skills is also important in Pakistan given that micro, small and medium enterprises (MSMEs) constitute 90 per cent of all enterprises, employ 80 per cent of the non-agricultural labour force, and contribute to 40 per cent of national GDP.

Furthermore, digital transformation will be important for Pakistan to address the long-term implications of the COVID-19 pandemic and gain long-term resilience.

In Pakistan, digital transformation will be important to boost its economic recovery efforts and enhance the long-term resilience of businesses in adapting to future “black swan” events in the post-pandemic era. For example, the pandemic has caused severe disruptions to the business operations of MSMEs, heavily impacted the tourism sector, and driven the rapid growth of digital freelancing in Pakistan.

These impacts can be managed by adopting digital technology applications that allow businesses to engage customers digitally, such as e-commerce platforms, or applications that create personalised experiences for customers in the tourism industry, such as big data analytics and virtual reality technologies.

There is a significant economic prize attached to accelerating Pakistan’s digital transformation.

If fully leveraged by 2030, digital technologies could create up to PKR9.7 trillion (USD59.7 billion) in economic value. This is equivalent to about 19 per cent of the country’s GDP in 2020. The sectors projected to be the largest beneficiaries are agriculture and food; consumer, retail and hospitality; and education and training.

For example, machine learning algorithms have shown to be beneficial for the agricultural and food sector, where AI-powered technologies can monitor ecological conditions to determine whether crops need irrigation or not, reducing water use.

There are three areas of action required for Pakistan to fully capture its digital opportunity:

  1. develop infrastructure to support the local tech ecosystem;
  2. create a conducive environment for IT exports, and
  3. promote innovation and digital skills.

A range of policies by the Pakistani government has already been introduced to accelerate digital transformation such as the “Right of Way” policy, which expedites the expansion of telecom infrastructure, and the “Brand Pakistan” campaign, which promotes the country’s exports via digital platforms.

However, there is further scope of actions for Pakistan to consider such as increasing Internet availability through infrastructure investments, especially in rural areas (e.g., Thailand’s “Net Pracharat” programme to expand the national broadband network), creating an accommodative tax framework and ease restrictive data policies, and forging close public-private partnerships to improve the relevance of skills training (e.g., “Philippines Talent Mapping Initiative” which involved Philippines’ Department of Labour and Employment consulting with employers to create a framework to analyse the competencies of Filipinos).

 

Through its programmes and products, Google is making contributions to Pakistan’s digital transformation journey and supports benefits to businesses, consumers and the broader society.

Google has been instrumental in advancing the country’s digital transformation journey in its contributions to the three areas of action. Google has and continues to invest in programmes, people and partnerships to support the “Digital Pakistan Policy”. These range from digital skilling for MSMEs, to training Pakistanis in emerging technologies like machine learning.

Google is building strong partnerships with government agencies and industry associations to promote innovation through the “Nest I/O” technology incubator and supporting Pakistani start-ups.

Google also facilitates job creation in the country. For instance, by enabling businesses to unlock new revenue streams and expand their businesses through the use of Google Ads, AdSense, and YouTube, Google indirectly supports over 410,000 jobs in Pakistan.

These jobs are created through the use of Google products that lead to businesses expanding their customer bases and increasing revenue, and subsequently hiring more staff to meet the additional demand.

Note on report

All information in this report is derived from AlphaBeta analysis using both proprietary research and publicly available data. Detailed information on the methodology can be found in the Appendix section of the report.

About the authors

This report was commissioned by Google and prepared by AlphaBeta. AlphaBeta (www.alphabeta.com) is a strategy and economic advisory business serving clients across Asia and globally. AlphaBeta works with the public sector, corporations, NGOs, not-for-profits and investors to identify opportunities and develop strategies to grow, improve service delivery, support economic prosperity and generate tangible impact.

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