In two years, the PTI-led government hopes to grow the IT industry by establishing tech zones across the country that offer tax benefits to investors.
The federal government approved the transfer of 150 acres of land to the Special Technology Zone Authority (STZA) in Islamabad in January this year in order to establish a special zone for technological growth.
The STZA was founded, according to the Cabinet Division, under the STZA Ordinance 2020. The authority has been given the task of establishing Special Technology Zones (STZs) throughout Pakistan. At first, one STZ will be established in each of Islamabad, Lahore, Haripur, Karachi, and Quetta.
According to STZA Chairman Amer Hashmi, the world’s fifth-most populous country plans to open a dozen such zones by next year.
It is granting a 10-year exemption from corporate taxes and imports of any equipment or construction materials required for the areas, which will give Pakistan’s IT industry a “catapult push” that may increase its size to $6 billion in two years, according to him.
Pakistan is counting on the new tech zones to provide jobs for the country’s youth, who make up about two-thirds of the population. According to the Oxford Internet Institute’s Online Labour Index, it already has the world’s third-largest gig economy after India and Bangladesh.
A flood of overseas capital into startups from fintech to e-commerce that began during the coronavirus pandemic is also creating demand for dedicated zones to serve these industries.
The initiative first emerged after Prime Minister Imran Khan sought answers at a meeting last year as to why Pakistan was missing out on the tech boom. Tapping on his own experience as an entrepreneur, Hashmi told the premier that the South Asian nation lacked a tech eco-system or an enabling environment.
Hashmi, who left his job with the International Business Machines Corp. in Canada and moved back to Pakistan to open a technology company, had to grapple with people asking for bribes and faced delays with setting up his own fibre network and data centres. The new areas will not have such issues and will be a plug-and-play model, he said.
“How do you get a Google or Microsoft or Amazon? You attract them and for that you have to give special incentives, which well I think we would have probably been the last in the region to give,” Hashmi, now chairman of Special Technology Zones Authority, said in an interview. “Dubai Internet City gave them. They got all the big companies.”
Cash-strapped Pakistan has tried several times to start similar projects in the past. In 2006, it planned to spend $1 billion to build dozens of software parks, though that effort failed. This time, the government’s efforts will involve attracting global investment to ensure the project takes off.
About half a dozen global companies and 50 domestic firms have expressed interest in setting up in proposed zones, Hashmi said, adding that as much as $1.5 billion of private investment will pour into these projects over the next two years. He is also convincing the government, which is spending millions of dollars on technology-based projects, to give more contracts to local companies. TPL Corp. is building one such tech zone in commercial capital Karachi.
“Pakistan can’t have a full-blown tech explosion. We don’t have the money,” said Habibullah Khan, founder at Penumbra, a digital marketing agency that also assists startups. “The latest public-private partnership model makes clear sense.”
Finance Minister Shaukat Tarin has also pledged to support the IT Industry, which he says could help diversify exports and help the nation get out of its regular boom and bust cycles.
The industry can be a game-changer and will be given “anything they want,” Shaukat Tarin said in an interview in May.