143 percent. Data provided by the State Bank of Pakistan shows how much Pakistan’s technology exports have increased over the past five years, from just $1 billion in fiscal year 2018 to almost $2.6 billion in 2023.
And while Pakistan’s policymakers are drawing attention to this growing sector, setting big goals and emphasizing overall export potential, the fact is that their actions are undermining the potential of the technology ecosystem. This means that it is damaging its long-term viability.
The main driver of this uncertainty is the arbitrary shutdown of the internet, casting a shadow on one of Pakistan’s few economic success stories. Even if limited to specific social media platforms, if these closures continue, they are likely to have a far-reaching impact on investor confidence, export growth, and the country’s reputation in global technology markets.
hindering investment
Growth attracts new investment in all sectors, especially those that can generate valuable foreign exchange in an economy facing sky-high levels of inflation. But investors also want stability and predictability when allocating capital, especially patient funds that seek to scale new businesses that require innovation.
In a technology sector where the pace of change is fast and the need for reliable internet connectivity is non-negotiable, arbitrary closures are a red flag for domestic and international investors. The unpredictability of such outages makes it difficult to ensure the smooth operation of digital services and the consistent supply of products to the market.
Although organizations can avoid shutdowns for the time being by using virtual private networks (VPNs) and multiple wired and wireless connections, overall sentiment is deteriorating. Moreover, VPN and multiple connections are additional costs that our competitors outside Pakistan do not have to bear. This not only hurts investor sentiment but also undermines broader competitiveness through higher costs.
Moreover, if internet access is taken away without notice, technology companies will be unable to meet deadlines, incurring financial losses, and eroding corporate credibility. For emerging technology companies and freelancers, who make up a significant portion of the overall tech industry, these closures can be especially devastating, with missed deadlines for even one client causing irreparable reputational damage. may occur.
negative perception
The negative headlines generated by arbitrary internet shutdowns create a higher risk perception among foreign businesses and customers. These companies may be attracted to Pakistani technology partners due to the low cost and high quality of their products, for example, but may be deterred by increased risk perception.
For sectors such as software development, customer support, and back-office operations that rely on uninterrupted Internet access, such interruptions are a deal-breaker. Unpredictability creates a perception of risk that many companies, especially large foreign companies with a low risk appetite for important technology contracts, are unwilling to accept.
This hesitation not only impacts new business opportunities but also jeopardizes existing relationships. Contracts may include provisions that penalize service providers for downtime, with repeated internet outages resulting in service level agreement (SLA) violations, financial penalties, and ultimately It may lead to loss of business.
Every internet shutdown in Pakistan sends ripples through international media, painting a picture of a country that has not fully adapted to the demands of the digital age. This negative publicity could be as harmful as the government shutdown itself, reinforcing stereotypes that overshadow the positive work happening on the ground in Pakistan regarding technology.
lessons of the past
Pakistanis are acutely aware that narratives of instability are difficult to dispel and can linger long after the situation improves. One example is the long-term impact of the deteriorating security situation between 2007 and 2015 on the country’s manufacturing export sector. As the level of violence in the country gradually increased, foreign partners stopped coming to Pakistan and chose to meet their partners in places like Dubai. Many believed that the broader political and security risks would act as a deterrent and directed other jurisdictions such as Bangladesh and India to do so.
These developments led to canceled export orders, reduced links to overseas supply chains, and a long-term decline in investment, which the country is still struggling with.
In the digital realm, the threat may be less visible today, but the impact of continued restrictions on the Internet will have just as much, if not more, impact in the coming months and years. will give.
The arbitrary internet shutdown is a self-inflicted wound on Pakistan’s technology sector, undermining the country’s potential to become a center of digital innovation. The implications for investor confidence, exports and the country’s international image are significant and far-reaching.
These closures also seek to address the symptoms rather than the underlying problems that are roiling Pakistan’s political economy. Moreover, they have the opposite effect, further increasing the dissatisfaction of society as a whole. Continued restrictions on the internet are a direct threat to Pakistan’s exports and the broader technology sector and must end immediately.
