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Can Pakistan become Asia’s start-up hub?

Published in Mar-Apr 2017

How collaborative efforts by the Government and private sector can help boost Pakistan's entrepreneurial ecosystem.
Photo: Online.
Photo: Online.

The Skype software was developed in Estonia, a small Baltic country with a population of 1.3 million people. The promising landscape it offers for entrepreneurs has earned it the title of ‘Europe’s new start-up hub.’ Besides Skype, which today has 74 million users, multiple billion dollar start-ups, including TransferWise have emerged from Estonia.

The Estonian Government has largely facilitated the growth process of the local start-up industry. The Estonian Entrepreneurship Growth Strategy 2020, an ambitious yet strategic policy document to drive economic activity, was set in place. By increasing productivity, stimulating entrepreneurship and encouraging innovation, the Estonian Minister of Economic Affairs and Communications says: “Estonia should be one of the best countries in the world to establish and develop a company.”

In short, the State has put in place a structured, coherent and measurable pathway for the industry to follow.

In another part of the world, with a similar ‘risk-averse’ attitude, the local entrepreneurial landscape is fast developing. Similar to Estonia, it is being driven by the State and more specifically, the IT department of the Government of Punjab that has been the catalyst of change.

Dr Umar Saif, who leads the department, has made it his mission to turn Lahore into our own Silicon Valley. As a first step, Plan9, a technology incubator (named after the first free-share operating software by Bell Labs) was launched in 2012. With the completion of its eighth incubation cycle, 130-plus start-ups have come up, some with net valuations ranging between six and $10 million. Collectively, they have made a sizable contribution to the IT job market.

How important has this incubator been in shaping the local scene? More importantly, what role has the State played in this?

Illustration by Creative Unit.
Illustration by Creative Unit.

To answer this, it is important to first analyse the factors which have hampered entrepreneurial evolution in Pakistan. Firstly, the people of Pakistan are risk-averse. From a young age, children are instructed to opt for mainstream career choices, such as engineering, medicine and teaching; the reason being the social status attached and the income flow these professions promise. Secondly, a typical household has limited capital funds available and these are not enough to allow young people to become involved in activities such as entrepreneurship, which are deemed risky. Therefore, entrepreneurship has not been a career option much experimented with, prior to the setting up of Plan9.

Taking into account these factors, the Government of Punjab decided to provide solutions. At first, through the IT Board and Plan9, the Government introduced the concept of ‘business incubation’. As the initiative was government backed, it was perceived as credible. In contrast, services offered by a new sector or by lesser known agents may be categorised as potential scams. In addition, the Government has a national outreach. As the message was spread, a new narrative was shaped.

Conceptually, entrepreneurship began to be embedded in the minds of young people and incubation became a new buzzword. This was furthered by Plan9’s efforts to encourage universities to replicate the incubation model. As a result, entrepreneurship received attention from academia as well. At present, 20 universities across Pakistan have set up incubators in collaboration with Plan9.

The importance of the need to promote entrepreneurship is captured by statistics. The unemployment rate in Pakistan is six percent (source: Pakistan Economic Survey 2014-2015); that is 3.58 million people who remain unemployed despite being able and willing to work. For the young, the figure stands at 8.5% (2013).

The situation becomes worse due to the fact that the growth rate and changes in the population are not proportionate. Today, with a population growth of 1.95% and the economy growing at 4.24%, one million jobs need to be created annually to fill the gap. Yes, one million jobs.

The unemployment rate in Pakistan is six percent; that is 3.58 million people who remain unemployed despite being able and willing to work.

With the vision to promote entrepreneurship and develop more job creators in the economy, the Punjab Government realised that the model they adopted had to be localised; therefore, a zero equity model was introduced. Plan9 provides facilities seen as necessary for a start-up to progress, such as office space, basic utilities, legal aid and a professional network, free of cost. In addition, start-ups are offered stipends for financial sustenance. With nothing to lose in monetary terms, young people have been attracted to entrepreneurship as a viable career option.

Furthermore, as the effort had an objective to impact the economy at large, entrepreneurship had to be categorised as a ‘public-good’. Therefore, going by basic economics theory, the cost associated with its provision may be ‘too-high’ for the private sector to operate on its own. This has positioned the IT Board in a critical way.

Similar to Estonia, the IT Board has been involved in ‘building blocks’ to develop a local entrepreneurial ecosystem. The Plan9 experience brought to the fore the need for yet another platform aimed at further refining graduate start-ups. The six months incubation programme turns a start-up from a business idea to a scalable model. However, it needs to be polished in order to become a company. As a result, PlanX, a technology accelerator was launched to bridge that gap. To date, PlanX has produced 30 start-ups and raised an investment of three million dollars. In a nutshell, the Government has the scope to practise ‘horizontal integration.’

Expanding the playing field to make these efforts more encompassing, the Punjab Government has launched additional initiatives powered by the IT Board. ‘Herself’ is a capacity building platform for aspiring women entrepreneurs that has trained a 100 women over a period of six months. By introducing alternate home-based economic participation models, Herself aims to increase the female labour force participation rate that stands at a low 25% (source: World Bank, 2014). Techhub Connect is a co-working space for freelancers and bridges the gap between academia and industry. Recently the e-Rozgaar scheme has launched 40 training centres across Punjab aimed at providing a three month training programme to 10,000 individuals in one year.

As the Punjab Government continues to deepen its efforts to strengthen the entrepreneurial ecosystem locally, persistent effort by their provincial counterparts and active participation from the private sector will make Pakistan ‘Asia’s next start-up hub.’

At a macro-level, the IT Board has played the role of an intermediary between different government departments and industry stakeholders. Round table conferences are organised on a regular basis to bring together key stakeholders to evaluate relevant matters. An output of these conferences has been the introduction of Punjab’s first IT Policy and revision of the taxation policy for SMEs and start-ups.

Dr Saif’s vision has started taking shape as the roots of entrepreneurship have spread beyond Punjab, inspiring efforts by other provinces and the private sector.

The Federal Government has set up the National Incubation Centre in Islamabad and is now working on the National IT Policy. The Provincial Government of KP, spearheaded by the KP IT Board, has set up technology parks in Peshawar and Abbottabad and a KP Digital Strategy is set to be launched. In addition, Digital Youth Summit – a premier tech conference and start-up expo – is supported by the provincial government.

The private sector, having assessed the feasibility of the concept in Punjab, has stepped up and is participating actively. Corporate players such as Mobilink and Telenor have powered business incubators, while academic institutions, such as LUMS, have set up centres for entrepreneurship that provide research input as well as practical, hands-on facilities to budding entrepreneurs. Initiatives such as Basecamp, Invest2Innovate, DotZero and Daftarkhwan highlight the thriving entrepreneurial culture in Pakistan. The Nest I/O in Karachi, powered by P@SHA and Google for Entrepreneurs is changing the game in Sindh and has made a plausible contribution to cementing the landscape with Punjab.

As the Punjab Government continues to deepen its efforts to strengthen the entrepreneurial ecosystem locally, persistent effort by their provincial counterparts and active participation from the private sector will make Pakistan ‘Asia’s next start-up hub.’

It’s not long before an app like Skype will emerge from Pakistan.

Nabeel A. Qadeer is Director of Entrepreneurship, the Government of Punjab.