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Funding for IT-Entrepreneurial Culture: a main concern

Funding for IT-Entrepreneurial Culture: a main concern

On 17th day of September 2001, an ambitious article of mine was published in the Pakistan Gulf Economist. The title of article was “TECHNOLOGY, THE LAST OF OUR SURVIVAL”. At that particular time, I was taking part in one of Asia’s largest Software Development initiative, worth 60 million US dollars in the heart of the middle-east. The said article was written on a positive note, but with a sheer frustration as to why such big efforts and projects cannot be undertaken in Pakistan, given the fact that majority of the key players i.e. over 70 percent of the developers, business analysts and program-strategist team-members were from the Pakistan.

After some 19 years, it was the 11th day of January 2019, when it turned-out to be a pleasing surprise when I participated in a brainstorming session held at the Federation of Chamber of Commerce International. The Program was hosted by Dr. Baig and Dr. Maqbool was the guest of honor. The eminent business and information technology leaders from Pakistan and North America graced the occasion and took a stock of challenges and prospects in context of digital transformation of Pakistan.

At the sidelines of the aforementioned IT-Networking Session, a number of keynote speakers referred and mentioned India’s better position in the areas of Call-Center-Business, Software Development, Hardware, Technology Infrastructures and specially the Indian Silicon Valley.

On 25th of January 2018, Fitch Ratings has downgraded Pakistan’s long-term credit rating and as this is leap-quantum from the position of 1960s when we use to donate and offer loans to some of our friendly country. Challenges on the economic font are at helm of many adversities faced by an ordinary man on the street.

Around 70K youths cross the age of 18 every-month, out of which 20K belong to Information Technology. Such youths stand flabbergasted when they look at the politicians and scuffling power centers managing each other, rather than focusing on economic development and job creation.

Back in 2001, we were squandering for about 34% of our revenues on debt servicing, whereas now, we seems to have crossed 60% in that regard. With a double digit policy rate, substantial cuts in development expenditures, our economy’s eco-system is more poised to nurture joblessness rather than growth and job creation.

The alacrity demands that national economy canvas be painted with human intensive sectors rather than capital intensive sectors. However, the construction and textile sector can lease life to over 20 other sectors, and may speedup the job-creation process—yet the Information Technology sector is poised to reap similar gains at a much faster pace and at a much lower cost as compared to the capital intensive sectors.

The emergence of a strong Indian IT sector is because of relentless efforts of Indian government carried-out in late seventies wherein host of other factors like government diaspora relationship, privative initiatives, setting up of the Information Technology Parks and Public Private Partnerships orchestrated to their tones. India’s software exports have crossed the hallmark of 170 billion US dollars which makes India the second largest software exporter in the world. All this is because of the visionary-steps taken by the Indian government in the midst of seventies which included the providence of free-land, tax-holidays and sense-of-security to software-industry pioneers some four decades ago. There is a need for the Government of Pakistan and IT-Ministry to invest in Technology infrastructure, on long-term basis, assuming returns in next-two-decades.

Our Ministry for Information Technology must accept this fact that we are suffering from a slow-development-syndrome and with one billion dollar software exports, around 400 registered software houses, and less than two dozen state-owned IT-sector educational institutions producing less than 20,000 IT graduates annually, there is little to be proud and there little to enable the nation to catch-up with India.

Business via e-Commerce or No-Business that’s the adage or proverb which Ministry of Information Technology should hold, portray and make it a conspicuous “reading over the wall” so as to embark upon a Journey of prosperous Pakistan. In late eighties south-Asian countries had a trend or a kind to race to setup IT-parks, or IT-villages. This is definitely too-late to either re-establish, or revive the past IT-parks which have failed in Toto.

The time for setting-up IT-Parks have been left far-behind, and as such, we should now embark upon a time-bound action plan to setup a Coral-Island where at-least one-thousand small ideas can be nurtured simultaneously—under one roof. This Coral-Island must include mentors, sophisticated IT enabled-telecom facility and end-to-end process of hand-holding an IT-Graduate and transforming him/her into a full-fledged IT-entrepreneur.

Funding or financing is the biggest impediment hindering the growth and development IT-entrepreneurial culture in Pakistan. Today, a young Pakistani IT-entrepreneur seeking funds has to either raise funds from bank at high-financing-cost or have to lose stakes to the venture capitalists seeking to invest in the business. This means funding would either be at the cost of adding liability or at the cost of stakes. The third and viable option is raising of capital through listing on the stock exchange or soft-loan from local or international.



There are three ways that Ministry of Information Technology can play the role of catalyst in helping IT-Setups to raise capital goods:

  1. Listing Facilitations: Setup a one-window facilitation center in Karachi for young IT-entrepreneurs. The young IT-entrepreneurs seeking to list and raise capital would only need to file their application with this one-window facilitation center. Once, the application is received in this facilitation center, it would be the job of Ministry of IT’s facilitation center to complete all the paper and have the company listed on the stock exchange. The Ministry of IT should hand-hold this setup should bear the listing cost for a period of two years.
  2. Match Making Portal: Setup a portal for Innovators and/or Investor looking for partners or business opportunities. The proposed portal would enable both the IT-entrepreneurs and venture capitalists to negotiate and establish business relationships based on the free-market principles.
  3. Setting up of a Fund: The Ministry of Information Technology can either request GoP or find an external donor agency to extend a grant of 200-500 million dollars which should be setup as a fund, that extends loan to small-IT-entrepreneurs at a fixed financing cost of 4%, such loans should have a ceiling of PKR one Million.

One of the recommendations, that I made at the forum in context of IT-entrepreneurial-funding has somehow seems to have been addressed by the Finance Minister, wherein SMEs are likely to get banking-loans at 400-800 basis points lower than the present rates. Nonetheless, the Minister should have rather had taken a courageous step and should have announced SME loans at a fixed rate of 6% or 8% which would have definitely served as nail into the coffin of majority of fiscal adversities at macro-economic-level. Nonetheless, there are still 4 years and 6 months to go.

The textile sector of Pakistan is the largest manufacturing industry in Pakistan which contributes 57% of the exports, shares 9% of the GDP and provides for 45% of the country’s total labor force. A systematic and a well-throughout digital transformation in the textile sector could raise the textile exports to 25 billion dollars. I

n today’s highly competitive environment, the textile sector needs to transform its supply chain management into Digital-Supply Chain Management, improve productivity, and maximize value-addition.

There is a need for the government/APTAMA to launch a textile portal and an android application with a view to add value and establish a link between outside world and Pakistani exporters, the incumbent portal must contain following information:

The textile portal should contain latest quota utilization, rupee/dollar parity, and discussion boards to facilitate communication instant replies on policy matters, and import related information to exotic buyers.

A national level Digital Transformation Strategy is the need of hour. Digital identity and real-time payment process are the two lost initiatives which should have been taken on immediately after introduction of CNIC by NADRA, some 10 years ago.

India houses for about one billion inhabitants and regions fastest IT growing Industry, yet its IT-exports worth 170 billion US dollars could not help much in terms of alleviating the poverty level which is still hovering about 70%, whereas, Pakistan having for about 220M souls, IT-export worth 1 billion us dollar and poverty rate beneath 40% is more than poised to beat-India and iron-out all the financial adversities single-handedly. All it requires is an executive level ownership wherein Pakistan’s Information Technology Policy is extended the same veneration and regards as that of Pakistan’s Nuclear Policy.

[box type=”note” align=”” class=”” width=””]The writer is the former general manager of Pakistan Stock Exchange, Member of FPCCI’s Committee on IT and TELECOM (2005-2006), and a Member of Computer Society of Pakistan[/box]

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