Pakistan’s IT Sector Growth vs. Challenges: The Overlooked Reality

March 16, 2025 Mahi Bukhari

IT Sector Performance in Pakistan: A Closer Look

Pakistan’s IT and telecom sector has witnessed significant growth in recent years, yet many critical challenges have been overlooked. The Ministry of Information Technology has highlighted the achievements of the sector, but concerns about slow internet speeds, firewall installations, and the impact on businesses remain unaddressed.

Government’s Report on IT Sector Progress

Key Highlights by the IT Minister

During a recent federal cabinet meeting, Minister for IT and Telecommunication Shaza Fatima Khawaja presented a one-year review of Pakistan’s IT and telecom sector. She emphasized several notable achievements:

Broadband Expansion: Broadband subscribers increased from 127.6 million to 142.3 million.
Telecom Revenue Growth: Telecom revenues surged from Rs817 billion to Rs955 billion.
Mobile Phone Manufacturing: Local mobile manufacturing rose from 21.28 million to 31.38 million devices.
Fiber Optic Connectivity: Cell site connectivity with fiber expanded by 12%.
National Exchequer Contribution: The telecom sector contributed Rs341 billion to the government.

Digital Transformation Initiatives

The IT minister also reported progress in digital governance and economy transformation:

E-Office Implementation: 42 divisions and 176 departments transitioned to digital governance.
Digital Economy Enhancement Project (DEEP): Initiated to digitize government services.
IT Startups Support: 229 startups received Rs2.04 billion in investment via eight incubation centers.
Skill Development: 300,000 training sessions were conducted, with plans to double this in the future.

The Ignored Challenges in Pakistan’s IT Sector

Slow Internet Speed and Its Impact on Businesses

Despite the highlighted growth, the government’s report ignored the serious disruptions caused by slow internet speeds following the installation of a firewall. This has led to:

Business Closures: Many IT-based businesses have shut down or relocated due to inconsistent connectivity.
Loss of Clients for Freelancers: International freelancing platforms like Fiverr issued advisories against hiring Pakistani freelancers.
Migration of IT Entrepreneurs: Several businesses moved to the UAE and European countries for better connectivity.
Telecom Industry Losses: Telecom operators suffered multibillion-rupee revenue losses due to customer migration.
Decline in IT Exports: The software association reported an estimated $500 million loss due to connectivity disruptions.

Lack of Effective Policy Making

While countries like UAE, Estonia, and European states are actively supporting digital marketers and remote workers, Pakistan’s IT policies are moving in the opposite direction, discouraging digital businesses from thriving.

Restrictions on Digital Transactions: Many IT firms and freelancers face payment gateway issues, making international transactions difficult.
No Clear Data Protection Laws: Uncertainty in data security and privacy policies affects investor confidence.
Limited Incentives for IT Exports: Unlike regional competitors, Pakistan lacks tax breaks and subsidies for IT exporters.

Urgent Reforms Required for Pakistan’s IT Sector

1. Internet Speed and Infrastructure Development

The government must invest in:

High-speed broadband infrastructure to meet global standards.
Alternative fiber optic routes to prevent outages and maintain internet stability.
Policy to regulate and improve firewall management while ensuring security and accessibility.

2. Creating a Freelancer-Friendly Ecosystem

Freelancers contribute significantly to IT exports, but face barriers such as payment restrictions and connectivity issues. The government should:

Negotiate with international platforms to ensure smooth operations.
Facilitate banking solutions for seamless financial transactions.
Offer tax incentives to freelancers to encourage IT entrepreneurship.

3. Strengthening Data Protection Laws

A robust Data Protection and Privacy Law is essential to attract foreign clients and investments. The government should:

Implement strict cybersecurity measures to protect digital assets.
Ensure transparent data governance policies to build global trust.

4. Encouraging IT Entrepreneurship & Startups

To create a thriving startup ecosystem:

Increase investment funds for IT businesses.
Offer low-interest loans and grants to young entrepreneurs.
Promote Public-Private Partnerships (PPP) for tech innovation hubs.

5. Reforming Digital Taxation Policies

Excessive taxation discourages tech businesses. Pakistan must:

Revise digital taxation policies to align with global standards.
Provide tax reliefs for IT startups and exporters.
Create special economic zones (SEZs) for IT firms to boost local production.

Future of Pakistan’s IT Sector: Challenges & Opportunities

Despite the setbacks, Pakistan’s IT sector has immense potential to contribute to economic growth, provided that key reforms are implemented.

Growth in Remote Work: With better internet infrastructure, Pakistan can become a global hub for remote IT jobs.
AI and Automation Opportunities: Investments in AI, cloud computing, and automation can help in economic transformation.
Collaboration with Global IT Leaders: Partnering with big tech firms like Google, Amazon, and Microsoft can attract investment and expertise.

Frequently Asked Questions (FAQs)

1. Why are IT businesses relocating from Pakistan?

Due to slow internet speeds, firewall restrictions, and payment issues, many IT firms are shifting operations to countries with better digital infrastructure like UAE and European nations.

2. How has slow internet speed affected freelancers in Pakistan?

Freelancers have lost clients as international platforms like Fiverr discourage hiring from Pakistan due to connectivity problems, leading to a decline in earnings.

3. What policies can help Pakistan’s IT sector grow?

Policies like better internet infrastructure, tax incentives for IT startups, improved payment gateways, and international collaboration can accelerate IT sector growth.

4. What is the role of data protection laws in IT sector growth?

Strong data privacy laws build trust among global clients, encouraging foreign investment and international partnerships.

5. How can the government support IT startups?

Providing low-interest loans, investment funds, tax breaks, and incubation programs can boost the growth of tech startups in Pakistan.