Pakistan needs its ‘Sputnik’ moment and the model for that is not Dubai Inc.

Published May 8, 2021
The technology sector is the brightest opportunity for Pakistan. — AFP/File
The technology sector is the brightest opportunity for Pakistan. — AFP/File

The technology sector is the brightest opportunity for Pakistan which is evident from the fact that over the past 12 months, Pakistani startups have raised more than $100 million in venture funding.

In the first quarter of 2021, venture funding has more than doubled compared to the same period last year.

Read: Startup Retailo secures $6.7 million seed funding, total investment reaches $9m

Pakistan is second only to Saudi Arabia in terms of capital raised in the Menap (Middle East, North Africa and Pakistan) region. Pakistan’s IT exports have increased 45 per cent to $1.5 billion in this fiscal year so far.

While the government seems to be conscious of the potential, the sector has not received the kind of attention and incentives seen in the construction and textile sectors. The preference is understandable since construction and infrastructure projects are more visible.

The two main initiatives launched by the government to promote the technology ecosystem are Special Technology Zones (STZs) and National Incubation Centers (NICs). My fear is that both of these might also gravitate towards becoming “real estate/construction” focused projects, rather than digital initiatives.

For instance, the core offering by NICs is office space for the startups that are selected. Similarly, STZs are focused on building physical technology “parks” and “campuses”, which are essentially more buildings.

This is not to belittle the importance of such offerings. Of course, it is great to have good infrastructure such as security, stable connectivity and most importantly a favourable tax and regulatory framework. However, unfortunately these are not the pre-requisites to developing a successful technology ecosystem. For it were, Dubai would have taken over the Silicon Valley a long time ago.

Some of the most successful technology companies have come out of garages, labs and university dorm rooms. There is proof closer at home. After all, the Pakistani startups that are raising capital are not doing so because they are based in some fancy technology park. Hardly any of them have come out of an NIC or other state-backed technology incubators.

I am afraid that the government’s attention might be misdirected. Boosting the technology ecosystem is not about building real estate. Instead, what’s required is to aim for programmes that can catalyse a technology revolution.

The best case study to learn from is of course the Silicon Valley. It was the US Space programme which kickstarted the technology revolution and led to advances in computers and the creation of internet. Many technologies which we use today have directly come out of space research. They include LASIK eye surgeries, memory foam beds, and LEDs for medical use to name just a few.

John F Kennedy explained it very well in his renowned 1962 speech about the Moon program.

He said: “We choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organise and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.”

Similarly, Israel’s technology and startup sector was born out of high-tech research initiatives in aerospace and defence. It is not a coincidence that Israeli technology companies specialise in areas such as digital marketing, artificial intelligence, and cybersecurity.

These lessons are well recognised and replicated by other countries. For example, in the UK, Germany and Ireland, where I have worked, the government provides grants and tax subsidies to startups working on high-tech research and development.

“Moonshot” goals inspire entrepreneurs and attract capital from investors. This is why Elon Musk is the richest man in the world and continues to attract capital despite not having a single company which is profitable. Technology innovation is measured by research and patents.

Pakistan needs its “Sputnik” moment. But the model for that is not Dubai Inc.

Ali Farid Khwaja, CFA, is the Chairman of KASB Securities. He lives in London with his wife and two daughters. He has worked in financial markets in the UK and Europe for over 17 years. He is an alumnus of Lums and was a Rhodes Scholar at University of Oxford.

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