Category: Blog

Authors’ note: The results discussed in this blog are based on a pilot. These findings are preliminary and are being presented for initial consideration and discussion. We will update this blog once information from wider research is available. 

In order to combat the spread of COVID-19, a large number of Islamic countries including Saudi Arabia, Iran, Turkey, and Malaysia have put restrictions on religious congregations and gatherings, including the obligatory Friday prayer. Leading international Sunni and Shia clerics have endorsed these rulings.

And yet, in Pakistan, there has been lack of clarity on the official stance on whether and how congregational prayer is going to be restricted as part of on-going lockdowns.

Many mosques in Pakistan continue to hold congregational prayers. In some cases, this has led to clashes between the State and mosques, in which police assigned to enforce the rules on Friday prayers have had violent confrontations with large gatherings of congregants. Since restrictions were introduced, some religious leaders have publicly opposed them, and continued to organise religious events and gatherings. The situation was further complicated on 14 April when prominent religious leaders, who initially acquiesced to support the federal and provincial governments’ restrictions, announced that they no longer support them. They further added that mosques will hold all daily and Friday congregational prayers, as well as special prayers during the holy month of Ramadan which will start on 24 April. By 18 April, the Federal Government effectively agreed to lift the restrictions on congregational prayer. Leading medical doctors in Pakistan and abroad have strongly advised the government to reconsider this decision given that it would increase the risk of exposure substantially. The national conversation on this issue is still on-going and changing rapidly.

The seemingly contradictory stances of the religious leadership and the government on this sensitive issue, and the daily changes in the official guidelines, send mixed signals to the general public. This could possibly result in actions by the public that increase the risk of the virus spreading even more in the coming weeks. There is a need to reach out to the country’s religious leadership, at the national and local levels, as a partner of the government in combating the COVID-19 outbreak.

Engaging with imams of mosques

 Muslims consider prayer to be one of the main religious obligations in Islam. Across the Muslim world, Muslims perform prayers five times every day; these may be prayed at home or in mosques.  Muslims also perform a weekly Friday prayer, which is considered as obligatory for men to perform in congregations. All such congregational prayers involve attendants standing in rows with their shoulders touching. The attendance rates for Friday prayers at mosques tend to be higher compared to daily prayers.

The Centre for Economic Research in Pakistan is conducting a study to test whether outreach with local religious leaders, specifically mosque imams (those who lead prayers at mosques), can enhance state effectiveness in dealing with the COVID-19 crisis. Communities consider imams as trusted sources of guidance on religious and social matters. We are reaching out to imams in the province of Punjab to learn about their response to and compliance with the government’s restrictions on Friday prayer. We are also gauging their knowledge about the spread of the disease and the government’s economic support programmes targeting the poor that have been impacted by the outbreak.

In the on-going study, we hope to contact thousands of imams across Punjab, sharing information about public health and decrees from leading international clerics supporting measures against COVID-19.

Findings from initial engagement

The preliminary findings from our pilot survey of over 100 imams in Punjab, conducted in 2020 from 31 March to 14 April, are as follows. This was the timeframe in which the government’s orders were to suspend congregational prayers.

 

Steps taken to tackle the spread of COVID-19

 There is some degree of conflict between the stances taken by most of the ulema and the provincial and federal governments regarding the status of congregational prayers. We think that this conflict plays out in the results as well.

Despite the lockdown and orders from the government to suspend congregational prayers, approximately 47% of the imams who responded to the survey reporting holding congregational Friday prayers the week before (Figure 1). So far, compliance with the government regulations seems to be better for rural areas as a higher percentage of imams of rural mosques reported suspending Friday prayers (Figure 2). For mosques that did hold Friday prayers, the average turnout was much lower than a typical Friday prayer at that mosque (Figure 3).

Many imams were keeping their mosques open, but reported taking at least some steps to prevent the spread of the virus.  However, most of these were restricted to cleaning the mosque or removing communal prayer mats (Figure 4).  Only about 40% of the imams mentioned that they either encouraged congregants to distance themselves from each other and a similar percentage discouraged handshaking or hugs among congregants.  After these results came in, the government and ulema announced a compromise of keeping mosques open, but with social distancing and hygiene measures as well as restrictions on attendance by the elderly.  Medical groups announced opposition to this plan, in part because these measures may be insufficient and impractical to enforce.  We will continue to gather data to find out how well these measures are being followed.

Sources of information

 The results show that imams mostly trust TV shows and their social networks for information on COVID-19 (Figure 5). Mainstream TV networks discuss the steps taken by the government to prevent the spread of the virus, steps taken by other Muslim countries (like cancelling congregational prayers), and the stance taken by local religious leaders/ulema.

In light of the conflict and confusion over rules that are being renegotiated every day, it is not clear what role the media and TV shows play in informing the views of imams. We can explore the kind of media that is consumed by imams and the messaging on such media platforms. Using these initial results, we plan to delve deeper into the role of media in informing the views of imams. This will enable us to suggest policy interventions on how talk shows and other forms of media can play a constructive role through their messaging.

Imams are receptive to information

On the whole, the imams seemed to be receptive to information about government rules and statements by religious authorities provided through the survey. While only 50% of the imams said that they planned to cancel Friday prayers at the start of the survey (Figure 6), by the end of the survey around 80% of the imams mentioned that they were considering postponing congregational prayers in light of the information provided during the survey (Figure 7).  However, we would view these numbers with caution as imams might simply state agreement to say what surveyors expected to hear. Going forward, we will collect follow-up information from imams and others in their areas on actual congregational prayers and closures.

We expected community imams to push back against the government suspension of congregational prayers, as some national religious leaders have done.  However, during the period when the suspension was in place, community imams we called were receptive to the information, not defiant. This suggests that there is room for meaningful discussion and change regarding the status of congregational prayers.  However, once the government revised its position in the last few days did respondents start to indicate more disagreement. This suggests that the combination of leadership from government as well as religious legitimacy (from the fatwas issued by international religious authorities) might be important for convincing imams to take steps to protect their congregation through social distancing.

Leveraging imams for spreading information about relief programmes

As imams are considered respected sources of information in the community, they can also act as a means of disseminating trusted information about various assistance programmes that have been launched by federal and provincial governments. In the survey, imams were provided with verified information on the various relief programmes and encouraged to disseminate this information through their mosque’s loudspeaker and to deserving families. Not only are imams aware of families that have faced economic hardship due to lockdown (Figure 8), they are also interested in the information (Figure 9) and willing to announce this information through their mosque’s loudspeaker (Figure 10). This dissemination of information could help ensure that all eligible households learn how to access the programmes, as well as combat the spread of fake information regarding them (Figure 11).

Generating evidence for policymaking on COVID-19 and beyond

We plan to scale up outreach with imams to spread information and quantify the impact of this kind of outreach. In the short-term, we aim for the results of the research to be useful in guiding government agencies in effective community outreach to address the spread of the disease, as well as mitigate the adverse economic impacts. If the results in the coming weeks suggest the engagement had a positive impact, we will actively reach out to the health department and other relevant departments to propose they consider scaling up this kind of outreach through mass media. As mentioned, 70% of imams cited TV programmes as their source of information. As a next step in the study, we will gather data on the specific TV programmes they watch and find credible ways to help inform rapid policy guidance on the most effective channels of outreach.

In the longer term, we hope our research will help us understand how states can best work with traditional authorities such as religious leaders. This will improve the effective response of states in both emergency and non-emergency situations, such as addressing misinformation on issues of law or public health, and improving take-up of government benefits among unreached groups.

 

The government of Pakistan has taken unprecedented steps to counter the effects of the COVID-19 crisis, but it is unclear if these will be enough given the challenges facing the country prior to the pandemic.

Pakistan is amongst the 180+ countries dealing with the coronavirus pandemic. There are now clear warnings of a global economic recession as workers continue to fall sick, factories remain shut, and healthcare systems become overwhelmed. Mitigating the health emergency and extent of economic loss will not be easy for Pakistan. The country of over 200 million is already going through a macroeconomic stabilisation, and ranks below world average on most human development indicators.

The spread of disease within and into Pakistan cannot be separated from the global context. The world’s urban population at 4.2 billion has now exceeded the global rural population, and almost 40% of Pakistanis live in cities. Meanwhile in the country, close to seven million use air transport.

COVID-19 has already surpassed the death toll of the more recent outbreaks of Ebola, MERS and SARS. While fatalities in Pakistan have as of 17 April hit 130, it has more than 7000 confirmed cases, and many more can be unreported. Half of these cases are now locally transmitted. Government estimates suggest by the beginning of June cases in Pakistan could rise to 58,000, while mortalities could lie anywhere between 5 to 10%
of this number. In all eventuality, Pakistan’s healthcare system is likely to be overwhelmed.

At the moment, it is hard to calculate and forecast the true impact of coronavirus beyond the estimated human toll. The outbreak is on-going, and researchers are continuing to learn about this new form of virus. While the SARS outbreak cost the world $50 billion, initial estimates for coronavirus are already suggesting a loss of $360 billion. In Pakistan, relatively localised epidemics (such as Dengue, measles and Hepatitis C) have posed challenges. A full-fledged global pandemic can have dire implications.

A fractured health system

Outbreaks of such scale expose gaps and fractures in the underlying healthcare system. This can be related to the timely detection of disease, availability of basic healthcare, tracing contacts, quarantine and isolation procedures, and preparedness beyond the health sector. All of these issues are especially prominent in resource-constrained settings.

Pakistan spends 2% of its GDP on healthcare, against a global average of 10%. It also fares much worse than its neighbours, Iran and India, in terms of health-related indicators. Latest data from the World Bank, presented in figure 1 below, show that in 2016 Pakistan spent around $40 per citizen on healthcare. By contrast, the comparative figure in India was $62, and Iran $415. With the growing crisis in Iran despite this higher spending on healthcare per capita, it is clear why policymakers in Pakistan are deeply concerned.

Figure 1

Source: World Bank

Some feel that Pakistan focuses on public health preparedness only sporadically, mainly as a reaction to episodes when vulnerabilities spike. The country therefore lacks a health system that can scale up both detection and treatment to adequately and timely address large-scale outbreaks.

Moreover, disease prevention is not just about a sound health system, but also concerns confronting factors that create conditions for poor health outcomes. For example, certain segments of the population (such as the poor or those with underlying health issues) remain disproportionately at risk of the disease. Low income is associated with higher rates of chronic health conditions such as diabetes and heart disease, and lower uptake of precautionary health measures.

Unequal access to healthcare combined with a lack of social protection

Unequal access to healthcare is a problem for everyone, since this disease does not differentiate between the rich and poor. Yet the poor are far less resilient than the rich in having tools such as access to private health care, better education, option to work from home, and access to insurance to lessen the shock of such outbreaks. In fact, this particular coronavirus can be up to 10 times more deadly for the poor.

The need for social protection is also almost always accentuated during an emergency. In Pakistan, social protection expenditure is just under 2% of GDP, far lower than the global average of 11.6%. Most of the informal sector is not covered by such schemes despite its contribution to the GDP (almost one-third) and employment (72% of all jobs outside agriculture). The Pakistani equivalent of a public distribution system, the Utility Stores Corporation, is grossly underfunded and unlikely to plug gaps if food supply chains are disrupted.

Dealing with resistance

The Government of Pakistan is particularly hampered in its ability to deal with COVID-19 by the social, political and cultural context of the country. Resistance created by community dynamics, local/religious beliefs, political instability, economic fragilities, and a lack of trust in government and institutions, has made Pakistan struggle with far less infectious diseases like polio. The fight against Ebola in Africa was subjected to similar challenges. Pakistan is now facing the same obstacles with coronavirus.

To counter this, mosques have been shut down in most Muslim nations including Saudi Arabia. However, Pakistani policymakers have not adopted such stringent measures for fear of a backlash from the religious wing. They have so far only restrained congregational prayers on Fridays. It is nonetheless important to explore ways of working with religious organisations and leaders to influence outcomes and behaviour.

Cooperation between different levels of government

On top of the challenge from religious institutions, within the government there are cooperation obstacles that must be overcome. There is a lack of coordination between the federal and provincial governments. Well-coordinated governance structures are critical for a quick and efficient response to such a crisis. As most critical services including health and social protection are now the responsibility of the provinces, each province is making decisions independently. However, border control and aviation remain with the federal government and provinces lack jurisdiction to tighten surveillance at airports.

Moreover, for countries as populated as Pakistan, local governments can play a pivotal role in reducing disease transmission and resistance to health providers by leveraging local networks. An absence of local governments has meant a delay in reaching communities to offer both healthcare and relief.

A major economic downturn

The economic ramifications of the crisis are also significant in Pakistan. A downturn in Pakistan’s GDP growth was anticipated even before the epidemic reached the country. The State Bank had already revised downwards the GDP growth rate to 3% from an earlier estimate of 3.5% for the 2020 fiscal year. The Asian Development Bank also lowered its projected growth rate to 2.6% from an estimated 2.9% while the World Bank has revised it downward to 1.1% and in the worst case scenario a negative 2.2%. Official assessments estimate an initial loss of PKR 2.5 trillion (around $15 billion)

It has further forecasted an economic loss of up to $5 billion, while official authorities expect anywhere between 12.3 to 18.5 million layoffs.

How is Pakistan responding?

The government of Pakistan has unveiled a PKR 1.13 trillion ($6.76 billion) rescue and stimulus package with a good balance between providing direct assistance to the vulnerable and protecting industry and businesses. The allocation is sizable but its true impact can only be assessed by how it is implemented. Some of this will be funded by support from the World Bank and Asian Development Bank coming in over the next few months.

Like many other countries, the government is experimenting with various forms of a lockdown. Sindh was the first province to implement a curfew-like lockdown. Karachi faces the most stringent measures compared to anywhere else in the country. Meanwhile, Punjab has implemented a milder form of the lockdown and Khyber Pakhtunkhwa (KP) a partial lockdown. The Prime Minister, Imran Khan, has been adamant against a complete nation-wide lockdown, stating Pakistan’s inability to handle its far-reaching economic ramifications.

Direct investments into healthcare infrastructure and services have also been undertaken. Currently, only half the 2,200 ventilators in Pakistan are functional to treat coronavirus patients. An amount of PKR 50 billion ($298.94 million) has been set aside to purchase medical equipment. Pakistan’s testing capacity has also been enhanced from 30,000 to 280,000 and according to official sources will be further enhanced to 900,000 within April.

The federal government has set up a Command and Control Centre for Coronavirus (COVID-19) to have a centralized mechanism for sharing information, updates, figures and directions on disease prevention and is gearing up to provide protective gear to frontline workers.

Using technology to create awareness

Pakistan is coming up with innovative smart solutions and exploring the use of technology to create awareness, mitigate the risks, and contain the shock created by such pandemics. To promote public knowledge, the government has, in collaboration with the telecommunication industry, replaced ringtones with an awareness message to the caller about the dangers of Covid-19 and measures that can be taken to remain safe. The government regularly sends an SMS to encourage people to wash hands and practice social distancing. Authorities are also contacting suspects of confirmed cases through mobile tracking and pushing them to get their tests done.

Ensuring food security

Of course, ensuring food security and access to a safety net are just as critical as having a sound health system. The government plans to temporarily abolish all taxes on food items and has announced a significant reduction in oil prices. Payment of utility bills has been deferred for three months for households with bills falling below a certain threshold. A sum of PKR 50 billion ($298.94 million) has been earmarked for government-run utility stores to ensure the constant availability of food and other necessities. PKR 280 billion ($1.68 billion) has been allocated to ensure wheat farmers do not face cash flows and to smooth wheat procurement. The government has also kept funds for logistical support to the National Disaster Management Authority (NDMA), the federal authority mandated to deal with a wide spectrum of disasters, to ensure food supplies.

Furthermore, cash transfers are being leveraged in the country. In fact, Pakistan already has in place one of the world’s most well targeted cash transfer programmes – the Benazir Income Support Programme (BISP). As an immediate top-up to the existing five million families under BISP, the government has enhanced their monthly stipend from PKR 2000 ($13) to PKR 3000 ($20). More recently the government has announced a basic income scheme to provide an emergency cash transfer of Rs 12,000 (compared to a minimum legal monthly wage of Rs 17,500) using data analytics to decide who is eligible to receive cash transfers. It is further expanding the inclusion criteria to provide relief to those on the margins of hunger such as daily wage workers, street vendors, rickshaw drivers, particularly during the lockdown period.

The provincial governments are also gearing up. The government of Sindh is providing relief in cash and kind through a mechanism of self-targeting where the needy call a designated telephone line. The process to determine eligibility is being refined alongside the rollout.

Protecting businesses

Setting the right foundation to kick-start the economy is imperative for the government. The economic stimulus package contains a whole range of fiscal measures (tax breaks, financial support via utilities, fuel and transport subsidies, concessions and tax refunds) to protect exporters and businesspersons. The government has also announced a separate package worth PKR 100 billion ($600.42 million) just for SMEs, which form close to 90% of all enterprises in Pakistan and generate 40% of non-agriculture employment.

The State Bank of Pakistan (SBP) has announced a Temporary Economic Refinance Facility to fuel new investment. This will offer subsidised loans to the manufacturing sector and a Refinance Facility to allow banks to get loans at zero mark-up, which they can offer to hospitals at 3% for five years. The SBP has also reduced the interest rate to 11%, still much higher than other countries that have cut down, but 150 basis points lower than before.

More recently the central bank has introduced a new refinance scheme to avoid layoff of workers in exchange for a loan at very low markup rates (5%).

Concluding remarks: The challenges remain severe

Such pandemics expose the inadequacies of the responses of successive governments to poverty, healthcare, and inclusive social protection and governance.

Some questions and thoughts for policy practitioners and researchers to ponder over. How can experts build a trajectory of how the disease is progressing in Pakistan, based on scientific and robust models using contextualised data? How can existing health management structures be leveraged across all levels of governance to enhance the overall national capacity to respond to the crisis? What policies can be adopted to protect the especially vulnerable segment of the population engaged as informal workers and not being targeted by existing social protection/relief strategies? Lastly, how can the plethora of information and data coming in, be used strategically to help the government plan and formulate strategies?

While one cannot predict what will spur the next major epidemic and when, early action can help prepare governments to handle it better. However, any strategy that counters such a pandemic must address underlying vulnerabilities. The challenges facing Pakistan in the current crisis are stark, and it remains to be seen whether the huge interventions that the government has undertaken will be enough to mitigate the loss of life and economic hardship.

Hina Shaikh is a Country Economist at the International Growth Centre (IGC).

This is an updated version of the article which first appeared on the International Growth Centre’s website here.

 

Special education, catering to the special needs of the disabled, is in in a debilitated state in Pakistan. A rise in the number of disabled is not supported with appropriate tools to identify and integrate them into mainstream society. However, with a Special Education Policy in the works, the Government of Punjab aims to move towards a more inclusive education system. This policy intends to categorize disabilities into four main groups, namely mild, moderate, severe and profound, and enhance public policy towards persons with disabilities (PWDs). Nonetheless, the adoption of this new pedagogical approach collides with the existing stigma attached with ‘disability’, and when this is further coupled with inadequacy in identifying and targeting those who suffer from it, it becomes difficult to construct a viable support system to facilitate those with disabilities in Pakistan.

According to the 2017 Population and Housing Census, 0.48 percent of Pakistan’s population is disabled; this shows a stark decrease from the 2.38 percent figure in the 1998 census. Other sources, such as the World Bank Report on Disability places the disability ratio in Pakistan at 3.56 percent, whereas the Annual Status of Education Report (ASER) indicates that 22.1 percent of the government schools have children with disabilities. This discrepancy regarding the number of disabled in Pakistan is connected to an underlying problem of identification. With no universal definition of disability in place and limited constitutional cover in Pakistan, these figures are deemed as controversial and unrepresentative of the true extent of this issue.

The Consortium for Development Policy Research organized a Policy Exchange talk, focused on ‘Leaving No One Behind,’ bringing together a panel of experts to discuss the future of special education in Pakistan. It explored the state of special education in Pakistan, as well as discussed the recent initiatives the Government has undertaken in improving access to education for people with disabilities.

The panel highlighted that a traditional binary approach was used for identifying PWDs in the census, where respondents were asked a yes or no question about whether they have a disability. The binary nature of this question does not account for those who suffer from undiagnosed disabilities or those who do not wish to identify as disabled due to family pressure and stigma. This inability to gather robust and meaningful data on disability severs the efforts made to integrate PWDs into the mainstream education system, and emphasizes the continued need to design and implement stronger mechanisms for the identification of those with disabilities.

Challenges for Addressing Special Education Needs

The aim of embracing inclusive education for people with disabilities has grown from minimal awareness and prioritization to a recognized component of the education policy in Pakistan, especially with the introduction of Article 25A in the Constitution of Pakistan, which guarantees a right to education for all. However, when one zooms in at the school level, there is still a sense of widespread confusion regarding what it means to be inclusive. Currently, children with disabilities are not only ten times less likely to attend schools compared to their peers without disabilities, but for even those who attend mainstream schools, the dropout rates are much higher for those with disabilities. This depicts a self-perpetuating trap, where lack of education amplifies the disadvantage associated with a disability, becoming another impediment towards the rehabilitation of PWDs.

Inclusive education entails that all children must be accepted as members of the social community, where the education setting for those with disabilities should be the same as their non-disabled peers. This mainstreaming approach at the school-level is focused on those who suffer from low to medium levels of disability. Experts recommend that children with mild levels of disability should not be segregated, but supported with special teachers and policy reforms in the mainstream education system. On the other hand, special education schools are required to accommodate those with severe or profound disabilities in order to address their special needs adequately aimed towards making them productive participants of society.

Although inclusiveness is a recognized goal on paper, it is not practiced at the school level, where either inadequate teacher training or social stigma prevents the identification of those with special needs. It is easier to identify a child with a physical disability, but becomes much more complicated in the case of a child who is mentally challenged and yet appears to be similar to his or her peers in other aspects.

Moreover, the rampant ignorance and discrimination against those with disabilities becomes more apparent in their life after school. With bleak employment prospects and lack of government support, these PWDs lack the means to sustain themselves. Their agony was evident in the recent protests at Mall Road, Lahore, where the visually impaired came out on the road to demand the Government to fill in the 8,000 vacant positions for the disabled in Punjab’s public sector alone.

The Role of Punjab Special Education Department

In the case of Punjab, special education falls under the mandate of the Special Education Department, which became independent from the School Education Department in 2003. Since then, the Special Education Department has successfully established 302 special education institutes at primary, secondary, and university levels, with the capacity to cater to around 35,000 disabled students. It has more than 600 buses to offer a pick and drop service to both teachers and students, and 42 hostels, offering accommodations to 2,000 disabled students. The Punjab Government now also offers a monthly stipend of 800 PKR to those with a disability, along with a health card to compensate for their medical expenses. Hence, this begs the question that if not capacity, where does the government lag in terms of policy making to improve access to education for PWDs?

Moreover, the new special education policy in Punjab promises to create better collaboration with different departments, especially the health and education departments, to improve the future prospects of PWDs. It also aims to increase the number of special education institutes in the province, while improving the role played by the research and development unit in enhancing decision-making and identification of disabilities.

The Way Forward

It is essential to understand that inclusion of any kind comes with acceptance, and hence, establishing an inclusive education system in Pakistan requires commitment towards cultivating relationships across students, parents, teachers, and the broader community based on increased awareness about mental illness. Examples exist worldwide where those with special needs have been integrated into mainstream society with proper support and inclusive policymaking. The education system in Finland, for instance, acknowledges the fact that at some stage in his or her life, every child requires help and support to move forward. Hence, the Finnish Government prioritizes early identification of those with special needs, such as learning difficulties, emotional or behavioral problems, and physical disabilities, by offering specialized support at the school level.

To ensure that inclusive and equitable education is offered to all children in Pakistan, the country needs to provide support at every level. This entails clearly devising identification parameters for different forms of disabilities and preferably combining social diagnosis for disabilities with a medical one. For instance, ASER has moved away from a binary questionnaire towards a more multi-dimensional approach, underpinned by the World Health Organization’s International Classification of Functioning, Disability and Health (ICF) model. The ICF model recognises disability as a three-fold issue based on an individual’s biological, psychological and social condition, generating unique insights regarding the incidence of disability in Pakistan.

Moreover, proper identification of disability must be followed by greater awareness at school-level for students, parents, teachers, and the school administration. Teachers must be trained to identify children with special needs during the early years of education, while the Higher Education Commission (HEC) must also facilitate these children with relaxations in subject selection and examinations. Lastly, it is also essential to create more inclusive spaces at the societal level, whether it is through designing more inclusive buildings or setting quotas for employment.

This blog post is based on two policy talks held at CDPR entitled, “Bringing Pakistan’s Tech Sector to the Forefront” and “Realizing Pakistan’s IT Export Potential“. 

Pakistan’s tech industry is shaping up. The country produces +20,000 IT graduates each year, it offers a domestic market of over 200 million, and has churned over 700 tech start-ups since 2010 of which close to 70% are functional even today. The industry has the ability to provide a fundamental boost to the country’s economy, especially in this time of fiscal restraint.

Several college graduates and young entrepreneurs are dreaming of the next billion-dollar idea. This conception is not far-fetched. A group of young Estonians developed Skype in 2003 which was eventually sold to Microsoft for $8.5 billion in an all cash deal! In fact, all tech giants across the world today have had humble beginnings. WhatApp was sold to FaceBook for 19 billion dollars, almost three times Pakistan’s defence budget. Such is the scope and potential of this sector.

On the flip side, statistics say nine out of ten startups are bound to fail. Those that succeed do so because of the right product fit. They have ideas that tap into a real market need and create innovative products that simplify lives. How do they make the right product? If their product is removed from the market, it will be sorely missed. This is when they have hit the jackpot.

Pakistan’s success story so far

With latest technology and access to faster internet, the tech industry is producing services and products, across sectors, that are increasingly more dynamic and revolutionary. The industry’s access to seed, private equity and venture capital funds is also improving.

Patari, an online streaming application and a household name for music lovers, made headlines when it secured $200k in seed money in 2017. In 2015, Eatoye, an online food delivery service, was acquired by one of the world’s largest food portals, FoodPanda and continues to expand across Pakistan. More recently, Airlift nabbed $12 million in Pakistan’s largest Series A funding – a company’s first significant round of venture capital financing – ever for a startup in all of South Asia. It is a ride-hailing startup which connects passengers with buses on a fixed-rate, operating in Pakistan’s largest cities.

These prominent app-based startups and many more cater to the domestic market, are part of the local economy and form an important element of the tech eco-system. There is another major component of this sector which caters to the international market (through software development and business process outsourcing) and is deeply embedded into the global value chain. However, most Pakistani firms provide low value products and services. Despite this, IT exports reached the billion-dollar mark in 2017-18, with software exports comprising $700 million. In fact, IT experts place the total exports at $2.5 billion (incorporating an estimated $1.2 billion earned by freelancers). This is however still much lower than India’s exports at approximately $125 billion for the same year.

Rising exports and domestic success stories show the immense potential of this sector. But two fundamental constraints are limiting this potential – restricted supply of skilled labor and lack of a supportive ecosystem.

Skilled workforce

The tech industry is highly skill and knowledge intensive. It may be able to withstand disruptive energy supply, but it will not flourish without an adequate supply of skilled labor.

Official statistics confirm that at least 10,000 IT graduates enter Pakistan’s workforce each year. At the same time Pakistan also ranks much better in cost than most lower-middle-income countries group. The average annual cost of a software engineer in Pakistan is one fifth of the cost in USA and Europe^[1]. However, of the total graduates, just under a thousand graduates are products of Tier 1 universities and of these around half meet the skills requirement for specialized input needed by the industry.

The tech industry relies on skills broadly of two kinds – technical/ specialized skills to develop and design IT products and skills to develop innovative business models and marketing strategies. One without the other will continue to constrain Pakistan’s access to a market for high value products.

The academic path to becoming a tech professional is not well defined. Product development relies on a workforce with more refined skill set, based on knowledge about product design, technology and marketing. Pakistan is not able to develop a niche in gaming (which is 80% of the revenue of Google and Apple Store) because its workforce lacks knowledge about game development and design.

At the same time, it needs creative minds that are able to come up with innovative solutions to problems put forward by international clients. Basic software development only requires writing codes towards an end-goal already defined by the client and therefore does not enable/require the workforce to become creative.

Since the required skills do not exist amongst Pakistani graduates’ firms, those wishing to capture the high-end market – have to also invest in skills development. In addition to a product risk (i.e. whether they have the right product fit in the market) the companies also end up facing an execution risk (due to inadequate skills).

The country also lacks creativity in developing innovative business models, regardless of how technically sound a product is. Developing scalable business models is a first crucial step towards attracting large sums of money or venture capital funds.

Developing good business models and creative products is only possible if the firms are supported by a strong educational/ training system. At the moment very few universities focus on subjects like entrepreneurship, computer design or branding which can help entrepreneurs when they start on their own and enable them to add value to their products. Pakistan also lacks a strong cohort of tier 2 universities.

Overall, the multifaceted nature of producing IT products/services requires a multi-disciplinary education. Currently, Pakistan’s education system does not nurture this kind of thought process or encourage innovation.

Having the right ecosystem

The country hasn’t yet created an ecosystem where an entrepreneur is born, raised, and educated in Pakistan and will go onto register his or her company in Pakistan and make it big. Young Pakistani entrepreneurs struggle to develop their ideas. At the same time, they are unaware of how to operate in the local market and how to attract foreign investors.

Pakistan has a thriving freelance industry. Globally it is ranked 4^th in terms of number of freelancers engaged in software development and technology[2].

Does this really demonstrate success for this sector, or does it indicate the industry’s failure to absorb the large number of graduates and provide them with gainful employment? And unless this talent becomes part of the formal economy, its growth will always remain constrained.

Access to funding is a significant bottleneck. There is only $0.06 per capita of venture capital money in Pakistan per year, while Bangladesh has $0.07, Nigeria $0.18 and India $3.72. In 2017, only nine Pakistani startups received venture capital funding compared to 34 in Nigeria, 38 in the UAE and approximately 790 in India. Overall, Pakistan’s tech startups raised under $30 million in 2018 compared to countries such as Indonesia (excluding unicorns^[1]) raised over $274 million in 2018.

The issue is two-fold: regulations make it cumbersome to set up a fund inside Pakistan; regulations make it hard to get money out of the country.

Global venture capital investors find the process of investing, having shares issued and registered riddled with red tape. Approvals are required from various government departments such as the Securities and Exchange Commission of Pakistan, Competition Commission of Pakistan and State Bank. This would put off anyone who has the option to invest elsewhere in the world. Due to over-regulation investment funds choose to operate from outside of Pakistan.

Foreign payments are heavily regulated and offered at unfavorable exchange rates. Pakistani startups prefer to route foreign funding using alternative means (such as register the company abroad) or keep the funds overseas.

Lack of recognized international payment gateways especially impacts smaller businesses as larger players rely on banking channels for their transactions. Absence of recognized payment gateways such as PayPal also make it difficult for new clients to trust young entrepreneurs, whether individuals or companies.

What more can be done?

Pakistan may have been slow to catch on but there is now wide recognition of the significance of this sector for the country’s economy. The government is carrying out initiatives and rolling out policies that are highly supportive of the ICT space in Pakistan. It has proposed a regulatory structure, though yet to be implemented, that intends to boost both the outward-looking and domestic ICT industry by providing an enabling environment.

The new government has established a 17-member task force on IT and telecommunications comprising members of the tech sector to advise policy changes and develop strategic plans to strengthen the technology ecosystem of Pakistan. In terms of execution progress remains slow.

Pakistan also approved its first ever Digital Pakistan Policy in 2018 to transform IT and other sectors of the economy. Under the landmark policy, the country aims to double its overall IT exports by 2020. However, this policy is not accompanied by a time-bound plan.

Pakistan has now launched a Digital Pakistan initiative, aimed at giving a comprehensive cover to government’s multidimensional objectives, such as job creation, ending corruption and supporting and promoting the economy. Underpinning this campaign are the five core pillars of the strategy: access & connectivity, digital infrastructure, e-government, digital skills, training & innovation and entrepreneurship.

Start-up incubators and accelerators are also springing across Pakistan run by both the public and private sector to support development of spinoffs and improve access to financial and technical resources. At least 20 incubators have been established in collaboration with Plan9 – a PITB run technology incubator. So far, it has created 1400 jobs and made an investment worth $5.8 million, with over 180 startups now graduated.

Initiatives have also been taken to ease tax regulations to encourage investment in this sector and make entry simpler for startups. The government also approved licenses for Pakistan’s first Private Equity and Venture Capitals funds. There has also been an agreement with South Korea to create a technology park in Islamabad.

However, to fully realize the potential of this sector, Pakistan needs to remove the core obstacles that limit growth. Despite all the positive reform efforts, an overarching IT policy is still missing. Convergence to a central policy document, will help avoid overlap between the various policy actors and help assign clear responsibility to each player.

Secondly, government should open up procurement for the private sector to encourage the tech industry to build their portfolio, get exposure to large scale projects and pitch for similar projects in the foreign market, apart from creating more jobs. Some big successes can be seeded on their back, making international venture capital sit up and take notice.

Improving the labor supply is a long-term goal. However, some quick fixes can be implemented to partially relieve this market constraint. Pakistan can create innovation clusters where industries and universities can come together to form specialized research hubs. Pakistan also needs to improve its learning by doing culture as most graduates take up to a year or more to fit into the industry. Finally, the higher education commission needs to take some serious decisions about the role it can play in promoting a culture of innovation, creativity and entrepreneurship.

Pointing out that Pakistan needs to advance on all these dimensions is neither news nor helpful development advice unless it is accompanied by a time-bound action-oriented plan that delineates responsibilities. The Digital Policy recently announced must be supplemented with a plan of action, with short to medium to long term plans on how the core set of objectives can be achieved with assignment of responsibilities across various stakeholders.

 

Zara Salman is the Senior Research Associate at the Consortium for Development Policy Research (CDPR) and Hina Shaikh is a Country Economist at the International Growth Centre (IGC) in Pakistan. 

 

[1] A unicorn is a term used in the venture capital industry to describe a privately held startup company with a value of over $1 billion.

[2] To put it briefly, incubators provide a fully equipped space for entrepreneurs to nourish and execute their start-up and provide mentoring and networking sessions. Whereas in an accelerator, the start-up is given a specific amount of time and a small investment to make it work.

[3] A technology incubator (named after the first free-share operating software by Bell Labs) was launched in 2012.