Special Technology Zones: A Gateway to Economic Prosperity for Pakistan’s IT Industry

In an era dominated by technological breakthroughs, Pakistan has strategically positioned itself as a significant player in the global Information and Communication Technology (ICT) market. The country’s ICT sector has not only emerged as a critical contributor to foreign exchange revenues but has also solidified its position with the fourth-largest freelancing workforce globally. However, the true game-changer lies in the creation of Special Technology Zones (STZs), sponsored by the Special Technology Zones Authority (STZA), marking a pivotal step towards fostering a knowledge-based economy and enhancing Pakistan’s competitiveness in the global technology sector.

The importance of the ICT sector in Pakistan’s economy cannot be overstated, comprising key areas such as software development, data centers, call centers, and telecom services. The business has displayed an export-focused character, reaching over 170 countries, with over 19,000 registered ICT enterprises under the Pakistan Software Export Board (PSEB).

Notably, the United States is the largest market, accounting for a sizable 54.50 percent of Pakistan’s IT exports.

The fiscal year 2021-22 saw a tremendous increase, with exports of telecommunications, computer, and information services reaching an astonishing sum of $2.6 billion.

The construction of STZs aligns with the government’s strategic plan to transform Pakistan into a knowledge-based economy. These zones, including Islamabad Technopolis, Lahore Technopolis, Pakistan Digital City in Haripur, and the Pak-Austria Fachhochschule Institute of Applied Sciences and Technology (PAF-IAST), aim not only to boost IT/ITeS sectors but also open doors for new opportunities in emerging tech sectors like AgriTech, aerospace and defense, gaming, deep technology, maritime technology, advanced engineering, AI, machine learning, and high-end manufacturing.

The formation of STZA as a separate entity under the Special Technology Zones Entity Act 2021 demonstrates the government’s unwavering commitment to fostering technology-based firms and innovation. STZs offer a variety of incentives to attract both domestic and international technology firms, including a 10-year tax exemption, a 10-year tax rebate, flexible foreign currency laws, and other benefits. STZs can benefit more than just economic growth, with strategic goals centered on technology exports, import substitution, foreign direct investment in technology, technology transfer, research and development, job creation, and human capital development.

Pakistan’s technology industry, already thriving, has garnered recognition, being rated the second-highest in South Asia for the ease of doing business.

Additionally, it holds a position in the top ten for accelerated business climate reforms while boasting a remarkable 70% increase in IT exports over the last three years. The inclusion of Special Technology Zones only serves to amplify this interest, besides providing a dedicated space for innovation and collaboration. One compelling rationale for the establishment of these zones is to nurture the next generation of IT professionals. With 10,000 IT graduates per year and 60% of Pakistan’s population aged 15 to 29, these Technology Zones cannot only create more opportunities but also encourage investment in training and employee care. As Pakistan seeks to use its youthful demographic dividend to further boost the IT sector, a focus on mentorship and teamwork becomes critical.

While the government’s efforts are commendable, certain challenges also need to be addressed to fully operationalize STZs. Complex official processes, lack of interdepartmental coordination, and lengthy approval procedures can deter potential investors. Recognizing such hurdles, the government has recently intensified collaboration with key agencies and initiated the construction of the National Aerospace Science and Technology Park (NASTP). Numerous Memorandums of Understanding (MoUs) with foreign and domestic partners, including industry giants like Master Card, Galaxy Racer, Shorooq Partners (UAE), and China’s SEDA and ZBRA, showcase the commitment to building a comprehensive tech ecosystem.

International collaborations include regulatory compliance, policy formulation, infrastructure development, venture capital investment, cashless transaction zones, advancements in web 3.0 technology, semiconductor innovation, and high-level executive training and education programs for Pakistan’s technology leaders. These agreements not only improve the technology industry but also contribute considerably to the general economic development of the country.

The decision to devote certain areas to the IT industry is analogous to building a workforce with global employability skills.

The focus on technology is a strategic decision with tremendous economic implications. The formation of STZA and the forthcoming “Digital One Window” program underscore the government’s commitment to fostering a favorable environment and addressing challenges. However, continuous efforts to improve policy and practice efficiency, drawing insights from well-established Technology Zones in countries such as China and the United States, and maintaining political and economic stability are critical.

The effective construction and management of STZs has the potential to transform not just Pakistan’s economic landscape but also position the country as a prominent player in the global technology arena. The perks, which include tax breaks, dividend income, capital gains, and quality of life benefits for businesses, as well as property development incentives for developers, make a compelling case for investing in these specialized zones.

To summarize, the establishment of Special Technology Zones in Pakistan is an effort that has the potential to catapult the country’s IT industry to new heights. These zones serve as a gateway to economic progress, providing a dedicated place for innovation, cooperation, and workforce development. Pakistan has the potential to emerge as a major participant in the global technological landscape with the appropriate strategic approach, considerably contributing to its economic growth and international status.

The views expressed in this article are the author’s own and do not necessarily reflect Policy Wire’s policy.