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Financial Times UK | Published: September 19 2006

Fast-changing Pakistan attracting investors in IT
By Farhan Bokhari

Just a year after Pakistan successfully privatised its state-owned telecoms company amid hopes that it would give a strong impetus to the growth of the country’s IT and telecom sectors, the record so far is mixed – as is the outlook.

The government, however, sees the privatisation of Pakistan Telecom (PTCL) as a crucial step towards revitalising a sector that has seen robust growth in the past five years.

The number of fixed telephone connections rose from 3m in 2001 to more than 5m this year, according to statistics compiled by the Pakistan Telecommunication Authority (PTA), the main regulatory body. This has raised the telecommunications penetration from just over 2 per cent in 2001 to more than 4 per cent – a telling indicator of the growth of the sector.

The growth of the cellular phone sector has been far more spectacular with the number of mobiles in Pakistan today at more than 36m, from less than 500,000 five years ago – a rise in penetration for the mobile phone sector from below half a per cent in 2001 to more than 23 per cent.

Such numbers are often cited by high ranking Pakistani officials as evidence of the telecom and IT sectors growing in tandem and laying the basis for fast-rising opportunities for digital businesses.
“This is an era of fast-paced change. Pakistan is a country which is attracting investors both from within and outside. Sectors like IT and telecom are of much interest to prospective investors,” was how Shaukat Aziz, the prime minister, once spoke of the growing business.

But the profile of Pakistan’s IT industry – with annual software exports this year of about $300m, according to data compiled by Pasha (Pakistan Software Houses Association), the national umbrella organisation of the country’s software developers – is easily dwarfed by the vast scale of the successes achieved by the sector in neighbouring India.

Availability of skills is an issue. According to Jehan Ara, one of the leading pioneers of Pakistan’s software sector and head of Pasha, it takes businesses from between six and eight months after hiring an IT professional to train them to become “professional players in a company’s in-house digital business related work”. Ms Ara cites the need to have a fast-paced growth in IT-related training opportunities as the most vital challenge for the country.

She says Pakistan’s growth record, though not comparable to India’s, nevertheless shows signs of gathering momentum as the $300m estimate for this year’s software exports is sharply above Pasha’s estimate for last year’s $180m.

She compliments the government for ordering the construction of three IT towers in the cities of Karachi, Lahore and Islamabad – an experiment that tries to emulate similar support given to the industry in other successful Asian IT countries, such as China and Malaysia.

The towers would be equipped with power back-ups and high speed internet connections to meet the needs of companies, although bringing the IT sector and some of the key companies together under one roof would be their most vital contribution to the industry, says Ms Ara.

Others, such as Amir Hashmi, president of a two-year-old IT company being cited increasingly as a big success story, believes Pakistan has crossed some of the key humps that hampered growth of digital businesses. Mr Hashmi’s company, known as SI3, saw its revenues from the domestic Pakistani market during the past year jump 550 per cent to $5.5m from the year before.

The company’s growth has prompted Mr Hashmi to plan offices in the US for the North American market and Kuala Lumpur, Malaysia, for the east Asian market. “The success of the software sector is a reflection of a sense of movement across the industry,” he says.

Yet some analysts warn that the prospect of recurring political uncertainty could hamper Pakistan’s ambition to become a destination for large-scale investments that could improve the profile of its IT sector and contribute to the growth of digital businesses.

General Pervez Musharraf, the country’s US-backed military ruler, who came to power more than six years ago, has overseen an economic turnaround and recovery as well as privatisation of companies such as PTCL.
But Pakistan’s opposition political parties have vowed to join and confront his government as the country prepares for elections next year.

The general also faces personal threats, having survived at least three assassination attempts, believed to have been the work of Al-Qaeda and related groups.

“During a recent trip outside Pakistan, people did not ask me about how the sector works and about the environment we have in this country,” says the head of an IT company just returned from an overseas trip.

“They wanted to know what was happening to Musharraf and how far this would have an impact on the way we do business in this country.”


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