According to CB Insights, a global research firm, the United States had 653 unicorns in 2023, followed by China with 169 and India with 70. Tiny Singapore, with a population of only six million, has 14 unicorns. Pakistan, a country with a population of about 240m and an area where more than 1,100 Singapores can fit, has none.

A unicorn is a privately held startup company with a market value equal to or above $1 billion. Most of these unicorns will eventually become multinational companies listed in various stock markets, thus playing their part in the prosperity of the nations they are based in.

So why could Pakistan not become a place where such companies can thrive? Many factors play a part, but the state’s mindset is the most important. Since its inception, Pakistan as a state could not fathom the importance of individual ingenuity and innovation in creating value, solving problems, and bringing prosperity to society.

Blame it on lack of will or lack of understanding, the state did not create the environment where businesses could flourish. Instead, more often, it placed chocks under the wheels of entrepreneurship; one example is the nationalisation of the 1970s. Most of the time, Pakistan’s policymakers and institutions remained (and continue to be) busy jostling for power or trying to materialise grand delusional ideological projects.

The state has to implement the rule of law and give businessmen economic freedom to boost entrepreneurship

The state has to take the lion’s share of responsibility here. It must change its mindset and understand that innovation and entrepreneurship are key to economic growth and prosperity. Only once it has understood the importance of enterprise can it play the necessary leadership role and create an enabling environment for companies to thrive and grow.

The government needs to learn that it cannot go and ask someone to create a unicorn; it does not work like that. Successful companies are made when people invest their talent and capital, and they do so only when they feel safe.

They need to feel sure they are investing their money and talent in a safe country where no one can physically threaten them and their family.A plethora of reforms is needed to establish the rule of law in Pakistan.

Besides ensuring the rule of law, which is its core responsibility, the state has to give entrepreneurs economic freedom. The Economic Freedom Index developed by the Heritage Foundation ranks Pakistan 152nd in 162 countries and puts it under the “repressive” category. Another research organisation, the Fraser Institute, ranked Pakistan 123rd among 165 countries for its rankings in 2021. This is an abysmal state of affairs.

Entrepreneurship culture cannot develop without experimentation. Unnecessary barriers in the form of registration requirements, licenses and no-objection certificates (NOCs) should be abolished. Some time ago, a friend shared with me that in order to import a simple 3D printer, one has to obtain NOCs from multiple government agencies in Pakistan; in comparison, private startups in the US can send rockets into space. We need that kind of economic freedom.

The state needs to play an active leadership role from policymaking to action on the ground to support a vibrant ecosystem for innovative startups. By setting up innovation hubs, the government can provide a platform where innovators can showcase their ideas to potential investors.

Offering grants and funding programmes specifically designed to support innovation can encourage more innovators to bring their ideas forward. The government can also offer guarantees to private investors against potential loss when investing in new ventures.

Hosting events, seminars, or conferences that bring innovators and investors together can facilitate networking and collaboration. This provides a direct avenue for both parties to interact and explore potential partnerships.

The government must also bring educational institutions, specifically universities, on board. Universities play a leading role in developing new technologies around the world. Many of these technologies are later commercialised.

Collaborating with private entities to create investment funds or joint initiatives supporting innovation can significantly boost the ecosystem. Facilitating partnerships and collaborations between local innovators and international investors or companies can bring in expertise and capital from global markets. The government needs to attract foreign companies, especially fintech companies like PayPal and Stripe, to set up shop in the country. Entrepreneurs should feel at ease when making and taking payments, and such companies will help with that.

Also important is to encourage locally successful companies to go global. This will involve allowing companies to take their money and invest abroad, but eventually, they will bring in much more than they will take out in the form of profit. All the great companies work globally and bring back huge profits to their home countries, and so will the future of Pakistani multinationals.

The writer is a PhD from the Lee Kuan Yew School of Public Policy, National University of Singapore and teaches at the University of Kotli AJK

Published in Dawn, The Business and Finance Weekly, December 25th, 2023