26 January 2004	Monday	03 Zilhaj 1424

The last few years have witnessed substantial growth in the telecom and IT sectors. The continuous development of the sectors has necessitated legal and policy reforms.

Accordingly, the analysis outlined below proceeds to recommend the establishment of an exclusive IT regulator, setting up telecom and IT tribunal, enlarging the scope of existing legislation, streamlining investment policy, and achieving uniformity of IT and telecom legislation.

With expanding dimensions of IT-related activities that entail the emergence of issues pertaining to e-commerce, e-banking and cyber crimes, the IT sector needs an exclusive regulator to create uniformity of response to such issues. Establishment of an exclusive IT regulator will be viewed as an additional attraction for foreign investment in the wake of competitive incentives offered by the neighbouring economies, besides, it will attach to the regulatory mechanism an aspect of certainty, which is pivotal in the context of foreign investment.

In addition to streamlining the state's response to the emerging issues, the IT regulator should be the only competent forum to adopt and authorize adoption of interception mechanism as anticipatory and preventive measures against the commission of cyber crimes.

And as for the interception regime, it is only a question of time for Pakistan to evolve a framework for interception mechanism as a safeguard against the cyber crimes. An expected surge of cyber crimes would compel a regulatory response in this regard. This can be predicted from the ad hoc measures that have been taken against the cyber crimes, which include establishment of the cyber crime wing in the Federal Investigation Agency (FIA).

It may be pertinent to mention that the FIA's crusade against cyber crimes does neither meet the constitutional and legal requirements mandated in this regard nor can the existing investigating authority of the FIA be considered sufficiently extended to intercept citizens' electronic activities.

Last but not the least, the existence of an IT regulator is essential to facilitate new business opportunities, which include providing large-scale online assistance (offshore outsourcing). A few local organizations have already started providing such assistance in respect of completing and analyzing tax returns of other countries.

Offshore outsourcing can generate massive employment opportunities in Pakistan and chances for Pakistan to attract such outsourcing assignments are clearly optimistic in view of the computer expertise available here inexpensively. Accordingly, it is all the more necessary to have an exclusive regulator for IT sector as a whole.

While formulating jurisdictional contours of the IT regulator, the new regulator should exclusively be made responsible for IT and the related-activities by minimizing any possibility of overlapping jurisdiction with any other regulator including the PTA. In this regard, categorizations of activities falling under the telecom or IT sectors should be revised, along with a mechanism to provide for continuous updating of such categorization.

Establishment of an exclusive IT regulator will achieve certainty as to the regulatory regime for both IT and telecom sectors. Consequently, a close coordination between the IT regulator on the one hand and existing IT and software related bodies and association (such as the PSEB and the PASHA) on the other will help consolidation of the IT sector and thereby strengthening the investment-friendly environment.

IT tribunal: The existing IT and telecom regime does not envisage specialized courts for trying criminal issues arising out of the regulatory exercise of power under such regime. Although it is not unusual for the regulators to enjoy quasi-judicial powers, there is always some distance between the regulator and its quasi-judicial branch.

The latest trend in Pakistan legislation is also in line with the international legislative practice. That is to say, providing for a judicial forum for the determination of facts and law after a decision by the quasi-judicial authority and before sending such decision to the High Court (for examining issues of law and not factual or technical).

Accordingly, specialized courts have been set up to deal with the technical issues with professional understanding of such complexities. The specialized courts are considered expedient for expeditious and consistent disposal of matters that require specialized attention. The hierarchy of taxation forums could be the most appropriate example in this regard. The taxation forums, although being an administrative part of CBR/ministry of finance, perform their functions with reasonable independence under the law that has established them.

Accordingly, a specialized telecom and IT tribunal should be established to adjudicate upon violations of the applicable telecom and IT laws. With respect to criminal action under such laws, the PTA and IT regulator should prosecute the delinquent before the tribunal by successfully maintaining a dignified distance.

At present, the PTA prosecutes/adjudicates on certain violations of the Telecom Act or any term of license issued by it. Prospective foreign investors may not consider the PTA's adjudication to be judicious on the part of the regulator that enjoys a respectable stature.

The Telecom Act also empowers the PTA to initiate a complaint for trial of any offence by a court. The Act, however, does not specify any court for such trial or prescribe any special procedure. In this vacuum, the already overburdened magistracy is asked for the trial of the sophisticated telecom subject matter without any special training. It may be noted that the availability of specialized courts add to the factors that attract foreign investment and the absence whereof increases the jurisdictional risk and thereby minimizes investment opportunities.

The tribunal should also serve as an appellate forum against the decisions taken in the regulatory jurisdictions of the PTA and the IT regulator. The Telecom Act provides for an appeal before the High Court as a first appeal, which generally restricts the scope of appeal to the questions of law only and leaving room for the High Court to remand the matter back to the PTA for a decision afresh on the technical aspects of the matter. The availability of an appellate remedy on technical issues would expedite litigation and help discourage procrastinating rounds of litigation.

On the other hand, the Electronic Transactions Ordinance, 2002 (ETO) does not envisage any right of appeal and thereby leaving no option to the aggrieved person but to approach the High Court in its constitutional jurisdiction, which again cannot be ignited for factual or technical issues and would result in remanding of matters to the Certification Council established under ETO.

Investment: Since 1997 the government has been treating 'software development and information technology' as industrial/manufacturing sector, which treatment means that foreign investors in the sector may own 100 per cent equity and are permitted 100 per cent repatriation of their profits. In terms of the Investment Policy, the federal government included a number of other incentives, like relaxation on import duties, to make it financially more beneficial to invest in Pakistan.

The investment policy categorizes certain activities of 'software development and information technology' as service sector, which categorization means that foreign investors in the sector may own equity and repatriate up to 60 per cent.

No explicit guidance is available from the Board of Investment regarding activities falling under or constituting 'software development and information technology' and to be accordingly treated under the manufacturing or service sector.

However, one may generally infer that IT-enabled activities, which would mean use of IT in any industrial or commercial activity, would fall under the service sector. And, on the other hand, IT-enabling activities, which would mean an activity intended to develop software or IT activity, would fall under manufacturing sector.

The lack of comprehensive categorization not only threatens to impede foreign investment but also make a case-by-case exercise of discretion inevitable by the Cabinet's Committee on Investment, and thus making the applicable regime uncertain and procrastinating the decision-making that is otherwise supposed to be a one-window operation.

Therefore, the investment policy needs to be restructured to better explain the comprising activities of 'software development and information technology'. It is equally important that the existing lack of clarity and vagueness regarding 'software development and information technology' as set out in the policy should be replaced with well-structured categorizations of the expression.

Furthermore, there are three broad sectoral categorizations in the policy: (i) manufacturing/ industrial sector; (ii) infrastructure sector; and (iii) other sectors. The activities comprising the 'other sectors', such as tourism and IT, enjoy benefits of manufacturing/industrial sector and effectively making the third categorization as redundant. Accordingly, the existing categorization should be a streamlined by retaining the categorization of 'other sectors' only if a distinct categorization is intended.

Legislation: In order for establishing an efficient IT regulator, the scope and powers of the Certification Council established under the ETO should be enlarged in terms that the Certification Council is vested with powers to, among others: monitor e-banking; regulate e-commerce, adopt and authorize adoption of interception measures, promote and facilitate off-shore outsourcing in Pakistan; and prosecute cyber criminals.

In addition, the proposed 'electronic crimes act', 2003, after appropriate modifications to its present contents that are required anyway to make it an independent legislation, should be merged into the ETO by way of amending the ETO. In this way, the ETO shall be the only sector-specific legislation for all IT-related issues and activities. On the other hand, appropriate amendments should be made to the Telecom Act to provide for above-stated appellate mechanism and prosecution.

With the establishment of an exclusive IT regulator and the Telecom and IT tribunal, the federal government shall be able to distance itself from the market, where it has an active and competitive interest in the form of PTCL, and play its chartered role more robustly in accordance with the internationally acclaimed mission. That is to say, the use of information and communication technologies for the elevation of poverty and eradication of the ensuing social evils such as illiteracy.