AS the world progresses towards the era of digital transactions, embracing the shift from paper currency, it becomes evident that going digital is no longer a matter of choice but rather the new norm. Remarkable strides have been made by countries like China, where e-money has been widely implemented across 25 provinces. In the realm of digital leadership, countries such as Singapore, Estonia, and the United Arab Emirates (UAE) continue to define the curve through their frontier thinking and proactive adoption of digital technologies. However, amidst this global digital transformation, Pakistan seems to lag behind its economic counterparts, such as Malaysia and Indonesia, despite being the fourth-largest freelancing economy.
Pakistan’s digital advancement has faced substantial obstacles in recent decades, primarily due to low optic fibre coverage and insufficient infrastructure investment. It is disheartening to note that Pakistan ranks 89th out of 131 nations in the National Regulatory Index (NRI)and 150th out of 193 countries in the UN’s 2022 rating of the E-Government Development Index. Moreover, it lags 33 places behind the global average in terms of broadband connectivity, which highlights the pressing need to bridge this digital divide. Profitability concerns and regulatory hurdles impede service providers from offering universal coverage and a high-quality digital experience. Consequently, the Fibre Development Index paints a discouraging picture, coupled with low internet penetration, where less than half of the population has access to broadband internet.
Unfortunately, the Data Protection Bill of 2021 remains stalled in review and drafting cycles, leaving the country ill-prepared to address digital privacy concerns for online businesses. In addition, limited digital maturity and the existing gaps in the overall ecosystem are taking a toll on the performance of various economic sectors. Transforming our economy into a competitive digital economy presents a formidable challenge that demands collective action. One of the major challenges in Pakistan’s digital economy is the lack of a secure and interoperable identity verification system for individuals and businesses. This impedes their ability to fully participate in the digital ecosystem, including accessing basic services and conducting financial transactions. Therefore, there is a need to develop and adopt a secured digital ID system with a supportive digital ecosystem to foster trust and safety in digital interactions.
To promote digital payments, it is essential to implement a comprehensive approach. Firstly, offering tax breaks to merchants as an incentive for using digital payments instead of cash can encourage adoption. Secondly, implementing a segmented tax structure that imposes lower tax rates on goods and services paid for through digital channels compared to cash payments can further drive the usage of digital payments, creating a favourable environment for businesses and consumers. According to a report by the Overseas Investors Chamber of Commerce and Industry (OICCI), the e-commerce sector currently represents only 1% of Pakistan’s economy, with less than 5% of merchants accepting digital payments. To overcome this obstacle and facilitate the growth of the digital economy, it is essential to mandate all registered businesses that meet a certain benchmark of business volume to offer online payments, thereby enhancing the ease of doing business (EODB) and catalysing the adoption of digital transactions in the country’s retail market.
To bridge connectivity gaps and promote the digitization of the economy, the government can learn from Indonesia’s and Philippines’ models, which have worked on similar lines. Indonesia has increased its e-commerce market by $30 billion. The Philippines has digitised public service delivery under the E-government Master Plan (EGMP), which has helped the country rank 95th in the EODB 2020 rating, improving its previous position. Our government can adopt a similar strategy by leveraging existing social protection programs like the Benazir Income Support Program and the Ehsaas Programme to deliver public services.
Furthermore, there is a need to prioritise increasing fibre-optic broadband penetration, improving 4G coverage, and formulating an AI policy to enhance decision-making processes, particularly in government departments such as the Federal Board of Revenue (FBR). Having up-to-date cyber security laws and strict enforcement of intellectual property rights can help attract global IT companies to establish their presence.
Apart from this, cloud computing has emerged as a vital component of digital transformation worldwide, catering to both advanced and emerging economies. Unlike traditional infrastructure that relies on physical installations for services like storage applications, cloud technology offers a more flexible and scalable solution. The Pakistan Cloud First Policy (PCFP) represents a crucial step towards embracing digital transformation in Pakistan. By prioritising cloud technology, the government aims to enhance connectivity, accelerate digitalization, and drive economic growth.
Moreover, Pakistan’s young population, comprising 64% of the total, presents a valuable asset that can be strategically leveraged. By providing affordable digital equipment through duty-free bulk imports, the country can empower its youth, unlock innovative employment opportunities, and potentially make a substantial contribution of approximately $60 billion to the national economy. Pakistan must adopt digital transformation to stay competitive and close the digital divide, as failure to do so could hinder progress and widen the gap between the country and advanced nations.
—The writer is a researcher at the Centre for Aerospace and Security Studies (CASS), Lahore.
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