Competitiveness in 

Usman Qadir
Musleh ud Din
Pakistan:
Ejaz Ghani A Case Study of the ICT 
Industry
 Great potential for growth and 
development – largely untapped

Industrial Performance and 
Motivation weak structural transformation

Case study approach can 
provide valuable insights

Introduction
 HIGHLIGHT ROLE OF  ANALYZE CONSTRAINTS TO 
INDUSTRY IN PAKISTAN’S  COMPETITIVENESS

Aims and  ECONOMY

Objectives

SPELL OUT KEY  RECOMMEND POLICY 
CHALLENGES TO  INTERVENTIONS
PRODUCTIVITY GAINS
Introduction
 Introduction

ICT Industry in Pakistan

Outline Key Sectoral Issues

Impediments to Growth

Policy Recommendations

Outline
 Primer on Industry

Information and 
Communications  Key trends
Technology 
Industry

Key issues

ICT Industry
 Cost‐effective tool for socio‐
economic development

Primer on the  Increasingly integrated into 
financial sector since 2003‐04
Industry

Government taking an interest 
in the sector

ICT Industry
 Growing Domestic Demand

Innovative Business Models

Key Emerging  Systems Integration
Trends
Growing and Fairly Robust Start‐up Eco‐
system

Growing Number of Success Stories

ICT Industry
 Key research commissioned: PSEB (2004‐05)

Area: Strategic challenges and best practices

Research on  Approach: analyzed organizational 
the ICT  characteristics
Industry in  Findings:
Pakistan • Industry more fragmented then
• Lacking future direction
• Growth hampered by 200 people barrier
• Strategic challenges for industry cannot be 
ICT Industry generalized – function of business model
 Business 
Models 
Identified

Source: P@SHA
ICT Industry
 Founded in 1997 in Lahore

Now global company with offices in 
numerous countries
Success Story 
‐ NetSol Engaged in licensing, customization, 
enhancement and maintenance of 
financial applications suite

Key to success ‐ willingness to take 
entrepreneurial risks; prioritizing 
ICT Industry
employee retention
 Small petroleum technology company ‐
Mathtech – workforce: 12 employees

Foothold ‐ creating database & integrating 
with GIS 

Success Story  Taken over by Haliburton; rebranded as 
‐ LMKR LMK Resources

Equity bought back in later years

Financing approach against industry 
“wisdom” ‐ reflects Silicon Valley saying
ICT Industry
 Faced with virtual extinction in mid‐2005

Excess capacity and equipment in 
Islamabad lent to client
Success Story –
Voxel 
Communications In exchange for outsourcing a certain 
number of seats to the company

Allowed company to survive

ICT Industry
 Human Capital Deficiencies

Low Adoption Rate of Automation

Access to Finance

Key Sectoral  Policy (In)Consistency
Issues
Regulatory Burden

Market Identification and Capture

Institutional Weaknesses
Key Sectoral Issues
Human Capital Deficiencies

Salaries Not Rationalized Curriculum Not Aligned
Employees – demand salaries  With current industry needs
commensurate with their Graduates mismatched for 
perceptions industry positions
Employers – perceive lack of  Result: on the job training
experience, education
Result: brain‐drain
Weak Adoption of Automation

Industry is technology  Trouble‐shooting an alien 
intensive by nature concept
Competitiveness requires  Result: fault is rarely corrected and 
automation multiplies causing greater friction
Even simple tasks not automated
Result: inefficiencies where they 
should not be
 Limited access to finance for firm 
operations and expansion

Banks: high transaction cost of 
servicing SME and free‐lance
Access to 
Finance Venture capital market: under‐
developed

New initiatives, especially by 
PITB, show promise
 Policy (In)Consistency

Industry perception ‐ Result: New IT policy by PITB:

state lacks:
policy coherence no credible long‐term  Developed in consultation 
Policy consistency  development vision with stakeholders
Regulatory Burden

Increased burden since 18th Investment in R & D
amendment
Pre: federal government Private sector: limited
Post: federal government +  State: numerous, with limited 
provincial + local
impact
 Market Identification and Capture

Local firms: PSEB: Global markets:

Limited awareness of  limited success unaware of capabilities 
markets and potential of 
Pakistani firms
 Institutional Weaknesses

STPs not achieved full  State sponsored  Reason: lack 

potential incentives not yielded  of/inadequate follow‐
designed benefits through
Workers acquiring skills not 
given appropriate jobs
Internship programmes out 
of sync with industry 
demands
Deficiencies in M & E
 Lack of appropriate business plans

Lack of up‐to‐date and relevant 
Impediments  legislation
to Industry 
Growth High quality human resources 
demand outstrips declining supply

Inadequate educational system

Growth Impediments
 Mismatch in Labour Market

Impediments  Lack of Widespread 
Entrepreneurial Spirit
to Growth

Policy Shortfalls

Growth Impediments
 Pakistan just as competitive as India in 
1970s and 1980s

Now: 3 out of 10 graduates – high caliber
Labour 
Market 
Mismatch ICT curriculum not current; quality lacking

Result: On‐the‐job training required

Growth Impediments
 Exists, but not widespread or 
readily apparent

Weak 
Entrepreneurial  Number of local success stories
Spirit

Silicon Valley stars

Growth Impediments
 No shortage of ideas

Policy  But ideas are not concrete
Shortfalls

Gap between policy formulation 
and implementation

Growth Impediments
 Census of ICT Industry

Education Policy Alignment

Policy 
Recommendations
Skill Development: Effective and aligned 
with industry

Incentivized Industry Operations

Policy Recommendations
 Expansion of Innovation and Incubation 
Centers

Effective Product and Capabilities 
Marketing
Policy 
Recommendations
Encouraging Cross Border Linkages

Incentivizing Software Technology Park 
Use

Policy Recommendations
 Key issues constraining industry 
performance

Integrated approach ‐ align education 
policy and skill development with industry 
demand
Conclusion
Potential to compete globally

Firms must be ready to do their own thing