How Pakistan can diversify, digitally
By Miles McKenna
A year ago, Farzana had no idea that an online business would so drastically change her life. She was drowning in debt with no way of repaying, worrying about her family’s financial future. Reaching for a lifeline, she joined GharPar, a women-founded, women-led social enterprise that connects beauticians with clients seeking at-home salon services through an Uber-like digital platform.
In just one year, her situation has completely changed. “Before joining GharPar, our family conditions were extremely dire, we never knew where our next meal would come from,” she says. “After being on the platform as a beautician for one year my whole life has changed. I now make around PKR 60,000 (about $450) per month. Through my savings, I have been able to buy a motorcycle for my family and currently, I am saving money for my son’s education.”
Farzana is not alone in her success. Since launching in 2016, GharPar has attracted over 100 beauticians to its platform — and, as part of the company’s social mission, nearly all come from marginalized and minority backgrounds.
Taking home 70 percent of the price of every GharPar request, beauticians’ incomes have soared. So while the average monthly salary of a beautician in a brick-and-mortar salon is estimated to be PKR 11,000 (US$82), according to the Pakistan Bureau of Statistics, a GharPar beautician makes PKR 60,000 per month on average. Top earners can double that. This jump in income has allowed these women to climb out of poverty, becoming household breadwinners and strong female role models in their families and communities.
“Before joining GharPar, our family conditions were extremely dire, we never knew where our next meal would come from.”
Pakistan’s emerging tech sectors
GharPar is just one of many startups that are taking advantage of Pakistan’s rising comparative advantage in technology. And a ‘tech boom’ could help to reenergize and diversify the country’s economy.
Pakistan’s primary exports — textiles, leather, and rice — have stagnated over the last decade. Rising oil prices, relatively high minimum wages in key sectors and a lack of innovation have eroded the country’s competitiveness in the global value chains that move these products around the world.
Yet, ICT services exports have been rising steadily since 2007. Many multinational IT firms, including Cisco, S&P Global, and Mentor Graphics — have already opened offices across the country, relying on Pakistani talent to deliver IT services to global markets. The industry is targeting $10 billion in exports by 2025, which would be 400% growth from 2017.
As technology continues to reshape global industries, supporting diversification towards IT and IT-enabled services is one way the Government of Pakistan can reinvigorate growth today while also helping build the global brand of Pakistan’s tech sector for the future. That means focusing reforms and incentive policies in three main areas of activity: (1) software-as-service exports, (2) virtual freelancing (e-lancing), and (3) e-commerce.
Software-as-service exports
Pakistan’s software-as-service exporters have been able to leverage Pakistan’s increasingly large pool of young software engineers and computer science graduates to offer services to global clientele at a competitive quality-to-price ratio. Industry associations report Pakistan now has more than 300,000 English-speaking IT and IT-enabled service professionals. With nearly one quarter (23.3 percent) of its population between the age of 10–19, there is potential to develop a pipeline of skilled young workers and entrepreneurs to help this sector grow.
Virtual Freelancing
Many of those who have not found jobs with Pakistan’s larger tech companies have become e-lancers in the global ‘gig economy’. Today, an estimated 150,000 Pakistanis offer their services on online e-lancing platforms, according to the Punjab Information Technology Board. This has helped make Pakistan the 3rdmost popular country for virtually outsourcing tasks, according to the Oxford Internet Institute’s Online Labor Index, trailing only India and Bangladesh and ahead of the United States and the Philippines.
E-Commerce
As the world’s 6th most populous country, Pakistan is also an attractive market for global e-commerce and a petri dish for young Pakistani tech entrepreneurs. Many of these entrepreneurs are trying to find marketable solutions to local problems — like GharPar — focusing on social impact and helping to drive social change.
Given all of this momentum and potential, how can the Government of Pakistan best support its rising tech sector? At the World Bank Group, we see a few ways to start:
- Strengthen the regulatory framework around e-commerce. This will help to safeguard data and to build trust between buyers and sellers. The government is already working on this — in particular, on consumer protection rights and on privacy/data protections. These are critical building blocks that will help to protect domestic consumers and to alleviate the concerns of potential foreign direct investors.
- Reduce the costs of regulatory compliance for start-ups and small businesses through consistent, streamlined, and transparent administrative procedures. Addressing the country’s complex tax system is already on the new government’s agenda, and this is a start. Granting small start-ups a temporary waiver on paying the Employee’s Old-Age Benefit could be another option. To help new businesses grow and to encourage them to formalize, the government needs to make it easier for them to interface with regulators.
- Strengthen oversight and regulatory mechanisms to foster cross-border electronic transactions. The State Bank of Pakistan is currently working on amending foreign exchange policies — a major constraint on the tech sector. Establishing dispute resolution mechanisms for e-commerce and formulating licensing requirements for establishing and operating e-commerce businesses will help.
- Focus on skills development — but not just technical skills and not only at the tertiary level. For Pakistan to continue to build its brand as a country known for excellence in digital technology and skills, the workforce of the future will need to be creative, agile, and resilient — skills that should be fostered at all stages of the education system. And fostered for all parties. Pakistan will need more women workers and entrepreneurs. The government should continue to level the playing field for women in education and in the workforce, to ensure sustainable, inclusive growth.
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