The Digital Economy

The economy and society are undergoing profound changes as a result of digitalisation. It fuels entrepreneurial innovation, regional economic growth, and productivity. Additionally, it has consequences for economic growth, the labour market, and political engagement. And it imposes new educational and training requirements – not just in the realm of information and communication technologies.

Today, as the world prepares for 5G technology, the IT think tanks in Pakistan must seriously consider efficient ways to catch up with the world and maximise economic benefits.

Despite considerable expansions of ICT access prior to the COVID-19 crisis, the ICT availability and use remained far from universal. The COVID-19 crisis expedited advanced economies’ digitalisation and made catching up more difficult for nations or areas trailing before. We must explore the current state of digitisation in Pakistan, its economic impact, and how should we pave the way for future technologies.

Digitisation is regarded as the fourth industrial revolution. However, in Pakistan’s case, we may not be at par with the world. The biggest challenge that the country faces is the overall readiness to completely make use of digitisation. According to the World Bank 5G readiness plan, the Government of Pakistan (aligned with the Pakistan Telecommunication Authority) must devise a strategy to attract multinational organizations to invest in a digital transformation infrastructure. There remain multifaceted challenges to Pakistan’s adaption of 5G technology. Despite a huge growth potential, we see that the Foreign Direct Investment in the telecommunication sector has dropped from a staggering US$763 million in the FY 2019-20 to a meagre US$202 in the FY 2020-1. The primary reason for this drastic drop in investment is the poor adaptability of technology amongst the population.

The economic contribution of the mobile industry in Pakistan might reach $24 billion by 2023, accounting for 6.6 per cent of the country’s gross domestic product.

5G technology offers endless economic and industrial benefits. Up to $3.5 trillion in revenue is expected to be generated by the 5G value chain by 2035, with up to 22 million employment being supported.

The Global GDP growth will increase by $3 trillion cumulatively between 2020 and 2035, according to projections based on 5G deployment. By 2035, 5G-related services, such as mission-critical services, increased mobile broadband, and enormous IoT improvements, would be worth over $12 trillion, according to estimates. Retail, healthcare, education, transportation, and entertainment are among the areas projected to benefit from 5G technology.

According to the Pakistan Telecom Authority (PTA), the country has over 98 million 3G/4G subscribers or 43.51 per cent penetration. Despite network advancements such as the addition of new 4G towers, over 90 per cent of mobile devices constructed or manufactured in the country are only compatible with 2G technology. At the moment, roughly 53 per cent of all SIM subscribers utilize 2G devices. The experts believe that for a successful transition to the 5G technology, at least 60 per cent of the population must be connected to the 4G technology.

The broadband penetration is only about 46.4 per cent in Pakistan, which must be expanded drastically to ensure economic benefits. Amongst many challenges that hinder the technology adaption in Pakistan are, “the lack of large contiguous blocks of the affordable spectrum”, “broader access to fibre backhaul” and “widespread availability of affordable 5G smartphones and other devices.”

Pakistan’s IMT spectrum management policy has been identified as the primary impediment to the sector investing fully in 4G development and sector competitiveness.

The current government does seem to have a good plan of action to boost the 5G technology in the country – some of which include:

o Tax rebate, tax rationalization, and elimination of duty tariff on import of all components of high end 4G and 5G devices;

o Duty-free IMT/5G network-ready equipment imports to facilitate 5G readiness and mobile broadband to support wider mobile broadband and 5G networks deployment;

o Special incentives for global Telecom equipment vendors to establish assembly and production lines in Pakistan to promote local assembly of IMT/5G and IoT ecosystem devices including chipsets, and

o Licensee shall establish at least one 5G Innovation and test centre/lab to scale up 5G ecosystem for start-ups and entrepreneurship activities at their own cost for citizens.

All these are indeed solid items on the action list but the Mobile Economy Asia Pacific Report 2021 projected, “Pakistan will be at the lowest end in terms of smartphone users as well the 5G coverage among the selected countries of Asia Pacific region by 2025.” According to the GSMA estimate, the economic contribution of the mobile industry in Pakistan might reach $24 billion by 2023, accounting for 6.6 per cent of the country’s gross domestic product. The same report estimates, smartphones will account for over 80 per cent of all connections in the Asia Pacific by 2025, up from 68 per cent in 2020. However, Pakistan was near the tail-end of the list of 12 major countries, just above Bangladesh, and it is expected that neither of these two countries will meet the 80 per cent target in the near future.

The 5G technology will be a game-changer for Pakistan. The Small and Medium Industries could benefit greatly by adopting online selling techniques, reaching global markets, and learning from international best practices, supply chain, and business operation strategies. Pakistan’s education and medicine industry is expected to be the biggest beneficiary of the 5G technology with its low latency and widespread applications, which can help overcome the poor student-teacher ratio that currently stands at 29 to one.

The truth is that it is not as easy as it may seem to the officials, from 2017 through 2035, the world will need to invest $3.7 trillion, or 4.1 per cent of global annual GDP per year, on infrastructure to overcome existing gaps. Of this amount, 54 per cent will go towards meeting the needs of Asian countries. Therefore, experts in Pakistan must carefully consider their approach to resolving the challenges in 5G technology and adopting a single national strategy.