12 January 2004	Monday	19 Ziqa'ad 1424

Our entry in deregulation era began in the late 80's when it was decided to switch over to privatization and free market economy. The basic aim of this initiative was to have recourse to such alternate measures to revamp the economy which had virtually run into snags due to unbearable burden of foreign debts.

Though the process of shifting over to deregulation was a new experiment in a control-ridden market like Pakistan, yet the endeavour did not go in vain.

Starting from disinvestment of non-performing entities and foreign direct investment in sectors like power generation, oil and gas, works and construction, etc, the country is prepared to embark upon macro-scale investment projects in the most modem and art-of-the-state areas of telecommunications, infrastructure development and information technology. The successful operation of four competent cellular mobile phone companies in the telecom market amply proves that the market could absorb more operators in the field.

The Pakistan Tele-communication Authority's (PTA) tender inviting expression of interest (EoI) for the grant of cellular mobile telephone operation license to two more well reputed companies, not only reflects the government's resolve to promote telecom culture but also affirms the notion that our market has full potential to bring Pakistan at par with those operating as telecom giants in the region.

Over the past few years, people from almost all walks of life have begun depending excessively on mobile service with many more rushing to join the queue. Recognizing the fact that policy of centralized management has made little progress in providing quality services to the people whose number is multiplying by 2.8 per cent every year, the government has converted the T&T department to a corporation with a fresh mandate.

The improvement in terms of performance can be gauged from the increased number of lines the system is making available every year to the people. Starting from a target of 200,000 telephone per annum in the late 80's, the PTCL is providing around 500,000 telephone every year.

With a network of 4.5 million connections being hooked up through a range of 32,000 exchanges, the PTCL system is trying to meet the demand at a faster pace. Though the population explosion has 'outpaced' the development efforts almost in every sector of national life, the output in relation to increased lines is not entirely hopeless. To get a telephone link at one's residence or shop is no longer a process of years; one can have the facility within a week or so.

The deregulation as an alternate course to move ahead has proved its credibility. Another advantage of the sector's march towards deregulation is visible in the form of 'pay phone' industry now grooming up in the country. Similarly, the ratio of cellular phone users has also shot up to 70 per cent within a time span of four to five years. During 2001-02, the cellular phone industry received Rs18.6 billion investment which has increased to Rs22.7 billion during the current year.

And thus the initiative to catch direct and portfolio investment in vitally important fields has set the pace to realize the cherished goal. A remarkable change is also visible so far as the commercial utility of the service is concerned. The PTA's decision to invite more companies in the field will widen further the base of foreign investment in the telecom sector already enjoying the dividends of over $ 9 billion foreign direct investment.

Pakistan presents a vast landscape of mountainous, agrarian, semi-agrarian, deserts and verdant-plain regions offering a variety of life and living norms to both the urban and rural sections in a country inhabited by 149 million people.

So the scope of hi-tech business and economic activity is gaining momentum in every part of the country. Even the 60 per cent rural population is no longer alien to the services of the telecom industry. Though the society needs much more at its receiving end, the PTA has managed a kick-start by deregulating the industry.

In a sense, the industry of Pakistan is faced with a great challenge. It is in this context that the PTA has floated international tenders to expand the existing network to a countrywide mechanism turning the cellular mobile phone service to a regular feature of social life in Pakistan. Issued under the Telecom (Reorganization) Act 1996, the EoI will bring in two more mobile telephone companies in a market where four operators are already competing with full confidence in and command over the field.

As per policy principle, these licenses would be awarded for 15 years to the most competent and proficient companies through a transparent process of open bidding. After completion of formalities by March 2004, the industry will be an open ground to six players in the bout.

Apparently there is a mushroom growth but the virtual position is much below the desired goal. The number of mobile phone users is estimated at 2.8 million. This does not make the case so strong for a country where 60 per cent rural population is still away from the IT bonanza. As against an average teledensity rate of 12.13 per cent in Asia, Pakistan is lingering on with only 2.7 per cent teledensity rate at present. We are far behind not only the world standards, and our teledensity rate is also incompatible to India where the same rate is 4.3 per cent.

Urban areas of the country however, enjoy an edge over the rural population where majority is still deprived of basic services including the telephone facility. The country is in need of more operators and the PTA's recent decision is a right response to the clarion call. It is estimated that after the induction of two more multinationals in the market, the number of mobile phone users would increase by three times within the period of one year. It will also open a variety of employment opportunities to the skilled, semi-skilled and trained professionals.

During the course of his presentation to the President and the Prime Minister on October 29, 2003, the PTA chairman anticipated $5 to $7 billion investment in the sector within next five years. In order to make the business more favourable to investors, the PTA has requested the finance division and the CBR to reduce activation charges and withholding tax especially to encourage new mobile phone companies.

The Board of Investment (BoI) has already offered tax holiday,100 per cent equity, custom rebates, with no restriction on repatriation of profit and capital and no question as to the amount invested as per requirement of the world market.

Pakistan's improving relationship with India has also been taken as a welcome gesture by businessmen. The State Bank of Pakistan has recently allowed custom duty concessions to India on additional 223 items under the South Asia Preferential Trade Agreement (SAPTA).

The government is trying to provide a favourable environment to the investors for smooth and hurdle-free marketing of their products both in and outside Pakistan. In addition to this. the PTA have already offered concessions on call charges per minute, royalty, type approval fees, line rent and new connection charges in both the rural and urban areas of Pakistan.