As Pakistan enters 2016, it faces a multitude of challenges ranging from chronic poverty to terrorism and high unemployment to a large informal economy. However, if we look at the positive, Pakistan has undergone an information and communications technology revolution over the past fifteen years. The astounding growth of the media industry, the inspiring spread of mobile communications technology, and the influx of a new type of business technology graduates has pushed Pakistan into a digital era. This is the best thing to happen to Pakistan since the Green Revolution of the 1960s. Already, we see a growing ecosystem of Pakistani entrepreneurs developing startups with the potential to become larger, successful entities. If this potential is channeled properly, particularly given Pakistan’s substantial youth population, the tech revolution could be a turning point for Pakistan to transform into a developed and prosperous country.
Right now, however, this potential is not being fully realized because of the indifference of Pakistan’s leadership and policymakers. In the current conditions, ambitious young people are pessimistic about launching a startup given the low probability of success and sustainability. The federal and provincial governments, in their respective capacities, can do much more to promote the growth of the entrepreneurial ecosystem.
India’s Central Government maintains many initiatives to cultivate a startup culture, and serves as a good example for Pakistan’s federal government. India’s Prime Minister Narendra Modi stated, “I see startups, technology, and innovation as exciting and effective instruments for India’s transformation.” From attracting foreign investment and collaboration, to setting up venture capitalists funds and one-window operations for startups – India’s government seems to understand the value of startups to the economy and works to facilitate them.
Pakistan’s provincial governments can take inspiration from a state government, Texas, in the United States of America. For years, Texas has built an environment to attract new tech companies, particularly to the City of Austin, and the results are a thriving entrepreneurial sector. I visited Austin as part of the 2015 Emerging Leaders of Pakistan fellowship program. We met with entrepreneurs and local government officials, who shared that Texas has become a hub for entrepreneurs and startups through low tax rates and job opportunities that attract young innovators. In fact, just as the San Francisco Bay Area is called Silicon Valley, the tremendous rise of tech companies in Austin led to a new city brand: Silicon Hill.
To cultivate the entrepreneurial ecosystem, the foremost thing Pakistan’s government must prioritize is simplifying the registration process and legal framework of operations for startups. Ideally, a separate process should be introduced for startups addressing all the relevant issues including founding directors, shareholders, transfers, and closures. Since startups are not always successful, an easy exit should be created for small ventures that limited wasted resources. A few years ago the government introduced a policy allowing single member companies, which was a widely welcomed step that led to the launch of numerous companies. A new policy framework for startups would induce an overwhelmingly positive response. The new framework should consider all aspects of launching a company and the bureaucratic hurdles that limit entry of small companies into the market. Most startups cannot spare the capacity or time to run between the Securities & Exchange Commission of Pakistan, the Federal Board of Revenue, the Pakistan Software Export Board, and Banks. Thus, a ‘one-window’ facility where all legal registration, memberships, and taxations could be conducted in a single day would encourage new, small startups.
For any startup, operational costs are a big hurdle to success. Sustainable revenue takes quite a long time, and seed money is usually never enough. Office rent and utilities are generally the biggest portion of operational costs. Technology parks in the country seek to address these high market entrance costs, but the current technology parks do not sufficiently address the cost concern or cater to the needs of all the startups. For example, the technology park in Islamabad’s price structure is not conducive for a startup with tightly budgeted seed money or one that has yet to generate a healthy revenue. However, encouraging news of the government establishing technology parks recently began circulating, and the Federal Minister of State for IT also hinted at this potential government initiative. Such initiatives need to be undertaken quickly, and executed as fast as the recent government’s mass transit initiatives, which were completed in a matter of months. Investment in highly subsidized office space and utilities for startups, particularly those led by ambitious young individuals, would certainly lead to a mushroom growth of entrepreneurs.
To further address operational costs, the government should establish initiatives to ensure funding streams for startups. This could include setting up venture capitalists funds, angel investor forums, or requiring the commercial banking sector to allocate a percentage of loans to companies that show high potential of commercialization and success. Pakistan Software Export Board can also play a role in the sustainability and promotion of startups by subsidizing participation in international exhibitions.
Finally, the government should provide startups a chance to bid for tenders floated by the federal or provincial governments. In many instances, the services required do not require a well-established company with multiple years in operation and a big portfolio but the tender documents demand it. This results in bidding by only well-established and financially-sound companies. This is one simple path that policymakers can provide startups, especially service-oriented startups, to conduct business and build their portfolio.
Every successful startup means more jobs and revenue generated in Pakistan’s economy. And with each new startup comes one more opportunity for a Pakistani company to go all the way and become a billion-dollar global entity—so let us harness this potential.