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Pakistani companies say internet disruptions this month have hurt their operations and spooked investors at a time when they are looking to the information technology sector to help break a vicious cycle of economic crisis and bailouts.
The warnings from business executives, investors and major IT organisations came after internet watchdogs reported noticeable slowdowns in connection speeds and service disruptions to applications such as WhatsApp, the Meta-owned messaging platform widely used in the country.
Nadim Elahi, managing director of venture capital firm TRG, which runs Pakistan’s largest outsourcing service provider, said internet connectivity is “by far the worst we’ve seen in the last 12 months.”
“If we want to be a global business processing hub, it’s essential that our customers have 100 percent reliable connectivity,” he said, estimating that connection quality has dropped by 30 to 40 percent.
Technology is one of Pakistan’s few standout sectors, and Islamabad has relied on software developers and IT freelancers to help pull the country out of a chronic shortage of foreign currency that has led it to turn to the IMF for help 24 times. IT exports rose 24 percent to $3.2 billion in the 12 months to the end of June, a record high, according to the State Bank of Pakistan.
Kalsoom Lakhani, co-founder of i2i Ventures, a Pakistan-focused venture capital fund, said slow internet speeds were negatively impacting “market perception”.
“Platform bans and internet slowdowns, especially as the reasons behind them are unclear and draconian, add to this uncertainty and further support the argument that Pakistani startups are a riskier investment,” she said.
“How can you invest in technology startups in a market where digital access is often limited?” she added, lamenting that investment had all but disappeared from three years ago, before Pakistan’s latest economic crisis and wave of political unrest.
Pakistani internet users have reported slowdowns and problems sending content such as photos and videos to WhatsApp over mobile networks since mid-August, and authorities have already blocked access to messaging platform Telegram and social media site X over national security concerns.
Digital rights activists believe the disruption is the result of the government’s deployment of “firewall” technology to filter content. “Our understanding is that the technology is being provided by a foreign government-backed company,” said Osama Khilji, director of digital rights group Boro Bi.
Prime Minister Shehbaz Sharif’s government has denied responsibility, and authorities have blamed the slowdowns on a range of issues, including faulty undersea cables, cyber attacks and the excessive use of virtual private networks to circumvent restrictions on some social media platforms.
However, Information Technology Minister Shaza Fatima Khawaja confirmed at a press conference this month that the government was working on upgrading the web management system with the aim of protecting Pakistan from “cybersecurity attacks.”
Pakistan’s Finance Minister Mohammed Aurangzeb acknowledged in response to questions from the Financial Times this week that there might be “temporary disruptions” to internet services.
Business sources said government efforts to impose internet filters could cause companies operating in Pakistan to face compliance problems.
“If data is intercepted at any level, IT companies doing business with the West could be held liable for millions of dollars in damages,” Ali Ihsan, senior vice president of P@sha, an IT association that represents about 800 Pakistani companies, said, citing European data protection regulations.
P@sha estimates that the internet disruptions of recent weeks have caused $300 million in economic damage, including damage to reputation and loss of future business.
The outcry from the industry comes on top of years of condemnation by human rights activists and opposition politicians of state censorship of online activity, particularly over criticism of the military’s role in politics.
“According to UN resolutions, slowing down the internet is a violation of fundamental human rights,” said Nigat Dad, a technology and human rights activist. “We’re talking about constitutional rights, accessibility, transparency.”
