Business Recorder (BR) Research
Last week had an upbeat note for Pakistan’s IT sector. First, the global manufacturing giant, General Electric, announced a multimillion-dollar investment to establish a Technology and Digital Center in Pakistan. In another multimillion-dollar project, the Korean Exim Bank started working on the feasibility study for an export-focused IT Park in Islamabad. Former is a commercial project whereas latter is a government-to-government collaboration.
The two developments are encouraging. GE is placing a bet on the potential of digitization in local manufacturing scene, in order to bring in efficiency and productivity gains. Meanwhile, through the Koreans capital investment and technical support for the software Park, much can be learned by Pakistan’s IT policymakers and practitioners from a high-tech economy.
Software industries in comparable countries are seen to have thrived on skilled labor and capital injections from foreign and local firms. In Pakistan’s case, the IT manpower recognition is on an upward path and it is mostly foreign. Globally renowned IT firms such as Cisco and Teradata have placed their trust in local talent through having sizable backend support offices here in Pakistan.
Similarly, Rocket Internet, a European start-up powerhouse, has gone big in Pakistan. Online portals such as PakWheels.com and Zameen.com have gone on to successfully close multimillion-dollar venture capital rounds with foreign backers. Google, Samsung, and US State Department are partners with Nest i/o, a prominent local tech incubator. Islamabad-based invest2innovate, which provides a four-month tech accelerator program for early-stage enterprises, has many non-Pakistani advisors and funders.
Foreign recognition through investments and technical support must lift the sector up. But even as foreigners have been gradually warming up to the local tech scene – even though the response is not overwhelming yet – one is hard-pressed to find local capital support for the fledgling tech scene. It seems as though local big pockets are either not too entrepreneurial or they simply do not see the opportunity.
Sure, there is domestic private sector involvement when it comes to investing in tech incubation centers in local business schools and engineering universities. But that is more on the CSR side. Big boys need to have risk exposure in the IT sector to be able to say they really believe in the sectors promise.
We all know how big neighboring India’s business tycoons have been on their IT landscape, from Premjis and Tatas to Ambanis and Mahindra. Yes, India’s economy is eight times and its population six times as large as Pakistan. Yet India’s software exports are about 100 times as large Pakistan’s reported IT exports. Long before foreigners drove to India in droves, some among the Indian tycoons took the business risk in local IT sector. Today they have global operations.
Foreign investment in the IT scene is welcome. But that alone will not suffice. Local investment has to pick up. But if capitalization is not an option, then large businesses can at least choose domestic IT solutions, which many in the sector say can compete well with foreign IT services. Local IT firms sometimes complain that they do not get a good response from local firms, which prefer to fly abroad to shop for IT services. This needs to change soon.
Originally published: November 12, 2015 in the Business recorder (BR) research.
