BR RESEARCHTHE TEAM

Sohaib JamaliResearch Editor

Ali Khizar AslamHead of Research

Murtaza KhaliqCreative Head

Rabia LalaniResearch Analyst

Zuhair AbbasiSenior Analyst

Hammad HaiderSenior Analyst

Sidra FarrukhResearch Analyst

Naseem Waheed

BR ICT REVIEW 2014 | December 16, 2014

Contents

FROM THE EDITOR’S DESKPAGE 3

APPRECIATING CRITICALITY OFINDUSTRY’S DEMANDSAnusha Rahman, Federal Minister for IT and TelecomPAGE 4

THE ICT OPPORTUNITYAli KhizarPAGE 5

USING TECHNOLOGY FOR EDUCATIONIqbal Mustafa KhanPAGE 28

EVOLVING CONSUMER PROTECTIONMuhammad AltamashPAGE 30

IS PAKISTAN READY FOR SOCIAL MEDIA?Zuhair AbbasiPAGE 29

TECH IS NO PANACEA FOR DEMOCRACYSohaib JamaliPAGE 31

USING SMARTPHONES TOPROMOTE GOOD GOVERNANCEDr. Umar SaifChairman, Punjab Information Technology BoardPAGE 25

TECHNOLOGY FOR DEMOCRACYEmrys SchoemakerDirector and co-founder, iMedia AssociatesPAGE 26

ADDRESSING E-GOVERNANCERaúl ZambranoGlobal Lead and Policy Adviser ICT for Development and e-governance team at UNDP’s Democratic Governance practicePAGE 27

ADDRESSING POWER WOES THROUGH ‘SMART GRID’Sidra FarrukhPAGE 22

MFS: OPPORTUNITIES AND CHALLENGESOmar Moeen MalikPAGE 23

SCALING UP RETAIL FINANCIAL SERVICESRabia LalaniPAGE 24

PAKISTANI START-UPSMAKING PROMISING STARTKalsoom LakhaniFounder & CEO, Invest2Innovate (i2i)PAGE 21

E-COMMERCE: PAKISTAN IS LATE TO THE PARTYMonis RahmanPAGE 18

THE PHENOMENON OF TECH-INCUBATION IN PAKISTANNabeel A. QadeerPAGE 19

PAKISTAN ENTREPRENEURSHIP ECOSYSTEMPAGE 20

“CLOUD SERVICES: NO DARK CLOUDHOVERS OVER SME PROSPECTSNaseer Akhterfounding President and CEO, InfoTechPAGE 16

“EXPORTS SHOULD REFLECT ITINDUSTRY’S TALENT”Asim Shahryar HusainManaging Director, Pakistan Software Export BoardPAGE 17

“PAKISTAN’S VOICELESS IT INDUSTRYNEEDS A DEDICATED MINISTRY”Salim GhauriCEO, NetSol Technologies LimitedPAGE 15

FOCUS ON ICT USAGENadeem Aslam Malik, Country Director of Huawei Technologies PakistanPAGE 12

FIXING THE FIXED INFRASTRUCTUREHammad HaiderPAGE 14

PAKISTAN HASPHENOMENAL IT TALENTNavid QaziCountry General Manager for Pakistan,Cisco SystemsPAGE 13

SPECTRUM SIZE DOES MATTERParvez IftikharPAGE 9

DAYS OF PLAIN-VANILLA PSTN OVERWalid IrshaidGroup head, PTCL Company & UfonePAGE 6

“FOR TELENOR, 3G IS NOT A SPRINT…”Michael FoleyCEO, Telenor PakistanPAGE 7

“CHINA MOBILE TO INVEST OVER$1 BILLION IN 3G/4G WITHIN 3 YEARS”Ge JianbaoActing CEO and Chief Financial O�icer,China Mobile Pakistan (CMPak)PAGE 8

ENTER MOBILE BROADBAND

KEY TELECOM INDICATORS

CONNECTIVITY ENABLERS

SOFTWARE SERVICES

TECHNOLOGY, ENTREPRENEURSHIP AND CONVERGENCE

ICT FOR DEVELOPMENT

`Technological havesand ̀ technological have-nots’

From Editor’s deskThe popularity of ICTs (information and communication technologies), an umbrella term for any communication device or application encompassing broadcast media, cellular phones, computer and network hardware and software, satellite systems, etc, and their use among people all over the world constitutes a profound question in relation to “technological haves” and “technological have-nots” particularly in a developing country like Pakistan. In its country report on Pakistan in 2005, a leading Western publication had made some thought provoking observations with regard to the rise of telecom industry in Pakistan. According to it, although poverty has manifested itself in this South Asian country of teeming millions in a variety of ways, a cellular phone, a modern device, is no longer the preserve of the rich; it is even owned by a beggar in any dirt-laden street of any big or small town of Pakistan. This was, of course, a sardonic but an intense comment on the all-pervasive onslaught of technological advances that owe their birth to new ideas, conceptual leaps and paradigm shifts. This point brings to one’s mind the never-ending “advances” in communication. For example, you cannot surf the web and watch videos online without noticing the rather nasty presence of pesky pop-up ads. Business Recorder website, too, is characterized by such features. Owing to a technological advance, however modest, small programs that are available free for download and that equip you with a gear to ward off the display of all such “irritating” ads with a touch gesture on the mouse of your PC or smart-phone. That technology does matter is a fact that has found its best expression in China’s paradigm shift from its policy of resistance to technology with a view to protecting the jobs of as many people as possible in a country of hundreds of millions living under the stagnant and suffocating spells of communism. Its technology-driven path under the stewardship of Deng Xiaoping from the late 1970s onwards turned China into a global manufacturing power house. A country that was primarily known as an agri-based economy is now seeking to compete with the West in technological advances, although not all of its achievements are in the sphere of ICTs: it has deployed, for example, the world’s first ultra High Voltage DC and AC lines; it has begun to export fast train technology with the world’s fastest train and the world’s largest high speed railway network; Beijing is rapidly deploying supercritical and ultra-supercritical coal combustion plants; it has over 30 nuclear power plants under construction. The list of China’s achievements is indeed very long. Insofar as ICTs are

concerned, China has developed the world’s fastest computer. Moreover, the world, at present, is observing a huge smart-phone boom in China. China Mobile is said to be mulling manufacturing this communication device in Pakistan as well. ICTs are making their presence felt in a variety of areas, including finance, education, healthcare and libraries. The global finance, including banking, is heavily dependent on ICTs. The banking sector in Pakistan has numerous success stories in the realm of ICTs—online banking is one such story. The e-government objective, however, still appears to be a distant dream for the penetration of ICT in this huge territory, or perhaps the largest virgin lands, has been found to be less than significant. The auction for 3G/4G technol-ogy in Pakistan, though a considerably belated affair, promises a higher connectivity with the world and therefore the realization of desired results, but in due course. The proponents of ICTs are required to lay greater focus on social sector with a view to lessening, if not fully eliminat-ing, the gap between “technological haves” and “technologi-cal have-nots”. They must not lose sight of the appalling literacy numbers in a population of 180 million plus. They must employ and promote the modern ICT devices and tools with a view to not only vastly improving the working and functionality of the corporate world but also giving birth to a hope that ICTs will act as a catalyst for a wider debate about efforts aimed at lifting the mass of humanity from abject poverty and deep quagmires of ignorance. All stakeholders, particularly the PTCL, are required to play their role towards achieving the highest possible ICT standards and services in relation to Pakistan’s economy, politics, social and cultural development. Dear reader, the BR ICT Review by Business Recorder’s research wing, BR Research, is an effort, however humble, towards realization of this very objective in a country where politics has a clear precedence over economic imperatives or anything else. Some of the current dynamics and aberrations in the country’s politics and economic policymaking, for example, owe their existence to the ICT-driven social transformation.

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I N T E R V I E W A N U S H A R A H M A N I T & T E L E C O M M I N I S T R Y

Appreciating criticality ofindustry’s demands

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When BR Research recently sat down with Anusha Rahman, Pakistan’s Minister of state for IT and Telecom, she had just returned from South Korea where Pakistan had been elected executive member on the International Telecom Union’s premier administrative council that oversees global ICT policies and strategies. Anusha seemed elated and attributed that achievement to Pakistan’s local progress in last sixteen months under her party’s government.

here was nothing significant that happened on the local ICT scene between 2008 and 2013,” she started off. “We had lost the ITU seat in 2010. We had lost the

election last time. With this election, Pakistan is now part of the decision-making for worldwide ICT policymaking”.

New Policy FrameworkWhile international recognition is all good, there is still a lot of work left to be done at home. To begin with, the telecom policy framework remains outdated. Anusha and his team have been working on a draft policy framework, so BR Research asked the minister about the overall drift of the policy-in-making: “The new framework will give our vision for the next five years. For the last one year, we have been working on this new framework and we have brought in quite a few new things in line with the evolving ICT dynamics. Among the salient features, we have added spectrum farming and spectrum policy. We want to give a message to the industry that if there is demand for spectrum, we’ll make sure that the supply is not scarce. Also, if you are going to just sit on the spectrum, now there will be possibility of questions being asked of their utility,” she said. “Then we have touched upon cross-border tra�c and transit tra�c through Pakistan. Our policy focus will be on the ubiquitous development by reaching out to the under-served and un-served areas, and the women and the youth segments through the resources of those areas. For that purpose, the Universal Service Fund will go in a big way,” she dilated on the priorities. At the time of the interview, she told BR Research that the government had completed the consultations and incorporated the feedback. The policy was expected to be announced somewhere in late November or early December. “What the election to the ITU body highlights is that Pakistan must seek policy consistency. If there is continuity, Pakistan already is an attractive market of 190 million people, with 60 percent of the population below 25 years of age,” she observed. Universal TelecentresThe minister gave a strong impression that women and youth in the left-out areas will be the primary focus of USF from now on. “We will make Universal Telecentres across Pakistan – about 500 in the beginning, for which a substantial amount of work has already been done, in partnership with the private sector. These UTCs will be the main source of e- and m-services for the people. The USF subsidy will provide the licensed operators with the capex for OFC connectivity and o�ce space for these UTCs.” So, what kind of services are we looking at? “We intend to take Nadra there, where its kiosks can provide citizen services like CNIC and passport issuance. We will connect each UTC with the Virtual University and provide 10-12 computers in each

one of the centers. We will lay down the infrastructure and encourage other universities to be a part of e-learning, too. Operators will also be able to issue their Sims from those centers through a biometric verification,” she explained. Between USF and ICT and R&D Fund, there are about Rs100 billion, according to her, and that money will be put to good use.

Ministerial PrioritiesEvery minister ought to have priorities. What would Anusha be focusing on during her term? “I am going to concentrate on big impact projects. My two focus areas are mobile broadband and optic fiber connectivity. In mobile broadband, we are expecting $1.3 billion in coming three years as investment in rollout of 3G and 4G services – that is in addition to $1.2 billion already made on four 3G and one 4G licenses. Pakistan has already laid 4000-5000 kilometers of OFC in Baluchistan, plus we are moving in Khyber Pakhtunkhwa, for having core infrastructure owned by Pakistan. Then there is a project for broadband provision in colleges, where we have selected about one hundred institutions.” She said her prime policymaking agenda was to help catalyze job-creation, especially for women and the youth. “I am also concentrating on finding a way through which ICT can empower women, for instance, by enabling them to work from home. We intend to bring special curriculum for training girls in ICTs, which we hope to bring about through the Universal Telecentres and other projects. That has already happened in Nigeria, and I am talking to them to introduce a framework for self-employment for girls in far-flung areas.” What is the minister doing on the e-government front? “MoIT is spearheading e-government and we are already in the process of replication of e-government programme in 28 ministries, of which 12 are done. The aim is to promote e�ciency and transparency in the domain of government services. The programme will be finished by December end. We have now set up a National Information Technology Board – a department that is the focal point for implementing all e-government initiatives,” she said. As for the software industry, she said that the MoIT had initiated the process of accreditation and supplication of Pakistani IT companies and ISO-9001 and ISO-27001 standards at subsidized rates, which will enhance the credibility of Pakistani IT companies. For Islamabad, MoIT has an agreement with Korean Exim for spending $50 million in building a technology park. The ministry plans to make, through public-private partnership, more technol-ogy parks in Karachi and Lahore. “But this is not enough. We will continue to work hard. Technology is an enabler. We can provide the infrastructure, but other factors need to be there. That’s why our model is that of public-private partnership,” Anusha maintained.

Local ManufacturingAnusha mentioned that encouraging local manufacturing of telecom equipment and devices was among the government’s key priorities. “I have spoken a lot about it as an opposition member. Just giving the market mobile broadband is not enough. What is important is that we provide the whole ecosystem. In this case, the end-to-end capability is a smartphone, which is an expensive item. 4G handsets are a rarity in this market. So we have now actively started work on a framework for enabling local manufacturing and to make it attractive. We have already sent out the consultation document to ministry of industries and FBR. The framework will soon be offered and available to everyone.” Will the framework be for device assembly or component manufacturing as well? “It includes everything. We will announce special incentives for local manufacturing. We hope to have an ecosystem such that we don’t have to import even a small pin,” she said. “But it won’t happen overnight, because Pakistan is not even on the telecom manufacturing radar right now. At this point in time, China Mobile, which has won the 4G license, has huge interest in local manufacturing. What China Mobile is offering to do – I don’t know to what extent that will materialise – but their initial interest is to bring the entire ecosystem of mobile handset manufacturing to Pakistan. They are asking for 500 acres of land and are looking at technology transfer.”

Next Spectrum AuctionIs there an auction timeline for the remaining two licenses? “There is already demand for more spectrums from existing operators. But we would like to do it in an optimal fashion. For the remaining 4G license, there will be a natural course and we have to wait till the 4G market slightly picks up. I personally would like to see more participation in the next round,” the minister shared.

High TaxesWhat about the telecom tax burden on consumers and operators, which is one of the highest in the world? Anusha said that MoIT has been in correspondence with the finance ministry on this issue. “I consider myself responsible for the growth in the telecom industry. We do not consider telecom is just about creating a revenue-generation artery. We want to give industry the opportunity to grow. And that’s why tax rationalisation is on our agenda. Hopefully, in the months to come, we will have some tax rationalisation measures,” she concluded.

BR ICT REVIEW

Interview by Sohaib Jamali and Hammad Haider

he benefits of deregulation, privatisation and technological advancement cannot be more visible in any Pakistani industry than in information and communication technology (ICT) where a monopolistic telecom structure has been gradually transformed into a promising

regime over the last decade. The 2003-04 telecom deregulation helped usher in policies that attracted many new players in cellular, local loop, broadband and LDI sectors. In a decade, cellular subscriptions have jumped from 5 million to about 140 million! The magic of competition and technology has created enormous consumer surplus from the days when you had to maneuver for getting a landline connection – to present day when free SIM cards can reach your doorstep by simply pressing a few buttons. The voice service is dirt cheap today, so are the feature handsets. The telecom revolution has also brought corporate culture to cities like Lahore and Islamabad, generating tens of thousands of jobs all around the country. It is pertinent to mention that in the high growth era of 2003-07, this industry attracted the highest amount of foreign direct investment. On the flipside, producers could not extract the juice to their liking as bottomline profits of majority of the six cellular operators remained in red for most of the time. Similarly, PTCL’s profits shrunk significantly in the immediate post-deregulation period, which was in part due to the effects of mobile substitution on the firm’s core landline business. In the cellular sector, post-2008, the valuation of some of the operators gradually reduced to a fraction from their peak in 2008, which explains a lack of merger and acquisition in a tough competitive environment.

Transition to DataThe cellular voice segment had saturated around a couple of years back and fresh investments stalled. The natural transition to data, which was long coming, finally happened this year after successive years of budgeting for the 3G telecom licenses. Now that can create ample space for other segments of ICT to come in big way in the market leading to the optimization of vacant spectrum. According to a World Bank study, a 10 percent substitution from 2G to 3G penetration increases GDP per capita by 0.15 percent. That is the promise that needs to be enchased. The rollout of 3G and 4G services is expected to be a game-changer. In order to reap benefits, telecom authorities and the regulatory watchdog have to learn from our own past and the mistakes the neighboring countries made in post-third-generation era. Pakistan has to have policies that incentivises players to adopt cost-sharing strategies. In earlier days, the egos of operators whilst lack of oversight by the regulator resulted in over-investment in cellular sites, which could have environmental hazards as well. Fresh investment is required to successfully roll out 3G network across the country and the optimal way is to share the infrastructure either by renting to each other or creating an intermediary company to do so. In data outreach, cellular coverage is just a fraction yet it may turn out to be a high margin service for the segment. The main emphasis of policymaking should be aimed at enhancing broadband connectivity, which, so far, only PTCL has been instrumental in. The coming years have to be focused on broadband expansion – experts are eying internet users to reach 100 million mark by 2020 from 30 million today.

Useful ConnectivityThe application of broadband connectivity on public management, private sector expansion and especially entrepreneurship is already visible. The automation process led by authorities like Nadra is paving way for documenting the social vitals and will go a long way in effectively countring crime (terrorism), enhancing tax-to-GDP ratio and improving social service delivery. Then the work being done at the Punjab Information Technology Board is exemplary for other provincial governments to improve

the governance system, healthcare facilities and education to name a few. There are now a number of incubators in various universities that are primarily feeding budding entrepreneurs in the ICT space. There is no dearth of talent in Pakistan as every now and then young boys and girls are in the news for making a mobile application or some other solution in the IT regime. Freelancers are estimated to contribute $700 million per annum in exports. There is a need to institutionalize this freelancing business where the experts can provide funds, business and avenues so the talented youth can achieve scalability. ICT is one sector that can help achieve the goal of export diversification; it can also help meet the growing import needs of an economy. The need is to have fiscal incentives for various branches within the ambit of ICT to grow. On the flipside, the FBR is squeezing revenues from whatever documented sectors that come in its way rather instead of focusing on expanding the tax-base. That is why telecom has the highest incidence of taxation when direct and indirect taxes are included. This may hinder the growth of next-generation services and hurt data adoption among low-income segments.

Financing the Next PhaseOperators have done a good job when it comes to deploying cellular connectivity across the country. They are now making heavy investments in rollout of 3G and 4G services. But the basic yet critical infrastructure – especially fiber optic (read more on this in publication in the following pages) – needs to be strengthened, something which operators alone won’t be able to do given the high capex. Here, a need for improving the performance of the telecom industry-funded Universal Service Fund (USF), which was created in 2007 for enhancing the outreach of ICT services in the far-flung areas, remains obvious. The incumbent federal government has conveniently deployed the USF money – according to some estimates, USF and ICT and R&D Fund’s collections have now swelled to Rs100 billion combined – to finance fiscal deficit last year. That has dampened the confidence of operators on the government and regulatory bodies. That needs to change. Operational and financial autonomy of these funds is paramount and government must pay heed. USF needs to pick up the challenge, bring the last mile connectivity and have adequate backhaul fiber optic infrastructure. The government also needs to continue the tax break regime for software exports, which is expiring in 2016. There is a risk that if the measure is not extended for, say, another ten years, and major software houses may keep the revenues generated from their overseas clients abroad in favorable tax economies like Dubai, Singapore or elsewhere. The revolution in data can have multifold benefits ranging from generating foreign exchange, enhanced GDP growth, higher tax revenues to employment generation and better socioeconomic service delivery. The foremost benefit would be in better public service delivery followed by the evolution of healthcare and education. A patient can have CT scans in Mardan, which in Karachi a senior medical practitioner can prescribe from his or her clinic, thus raising the doctor to patient ratio. A farmer can benefit from an innovation technique deployed in New Zealand to have similar benefits in Sahiwal. Similarly, vocational training can be done remotely and students having access to virtual educational academies can easily benefit from what is being taught at some of world’s top universities. For all that to happen, there is a need to provide the right fiscal, operational and technological platforms for numerous small players and let them scale up like quite a few did in India. In the years ahead, you may see mobile set manufacturing (assembling) facilities coming home as China Mobile is mulling entering this segment. With improved political stability and law and order situation in Afghanistan, Pakistan can benefit from exporting ICT goods and services to the region. Local ingenuity is immense. It is time to channel it through the ICTs more effectively.

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The ICT opportunityT

BR ICT REVIEW

A R T I C L E A L I K H I Z A R

The writer is Head of Research at BusinessRecorder. He can be reached at: ali.khizar@br-mail.com

06

Days of plain-vanilla PSTN over: PTCL chief

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A new era: new rules?In his conversation with BR Research, Walid Irshaid, the group head of both PTCL Company and Ufone, noted that as mobile network operators (MNOs) start offering 3G data services, lessons from the past must not be forgotten.

akistan was among the lowest in the world in terms of cost per minute - but quality has been worst likewise – you had to change places to make calls. If we see that

the market for data replicates the voice market, it will be a disaster. If that happens, first, companies will face financial di�culties. Then 3G will be of no value to customers due to low service quality: squeezed margins mean compromised quality. That should not happen to data,” Walid Irshad started off. But in the same breath, the PTCL boss noted that he had reason to be optimistic. “I have looked at various 3G data offerings so far and feel that operators have taken a quite reasonable starting point in pricing. There is some learning; some wisdom that what had been done in voice has damaged practically all of the industry. Packages launched thus far are good and prices are reasonable. So I don’t see the kind of slaughtering we had seen happening right now,” he said, referring to the voice tariffs that are kissing the floor right now.Yet he cautions that for mobile broadband adoption to increase, mobile broadband must come bundled with many value-added offerings. That will of course impact pricing. “It’s plain vanilla internet offering right now, because it’s early. So we need to see where the pricing goes from here.” Walid emphasized that broadband services need a whole ecosystem. “Launching 3G and 4G is one thing. Us putting the infrastructure, trying to do more fiberization, trying to link Pakistan with outside world is also needed. Then terminal equipment has to be made available and affordable. Local content development is also important. All these factors have to be put together and they need to interact together.” He suggested that broadband be made a basic right for citizen to access, and if people want it, the service should be made available without discrimination. “USF is doing good work in projects of Telecentres for e-services, rural telephony and fiber optic program. In the new realities, there is a need to revisit the outdated USF rules. Let us make the interventions technology-neutral and take all types of broadband to rural areas facilitate access. Operators are catalyst and they can help in the e-government, e-health, e-learning, and e-agriculture projects – if there is a mandate. Fragmented work has been going on but the time has come for more consolidation,” he noted.

What’s up at Ufone?BR Research asked him about the reason why Ufone bought the smaller, 5MHz 3G spectrum block and skipped the 4G license altogether. Walid replied by first noting that it was not because Etisalat was losing faith in Pakistan or the market, which are

both poised to grow. In fact, there is a determination in Etisalat and government of Pakistan to resolve and close the outstanding issue of PTCL property transfer, he said. “Etisalat have been the leading player to bring 3G and 4G in the regions that they operate. Firstly, we thought launching 3G before 4G is better for Pakistan, because 4G is just an evolution over 3G. Secondly, we felt that currently there is no business case for 4G, because the market is not ready for 4G yet. Broadband is a completely integrated ecosystem. As 4G is a few years in the future for Pakistan, we decided it was best to take a 5MHz block and launch the 3G first. You see, only one operator opted for 4G. The rest opted for 3G,” he explained his group’s position. But wait; will the 3G/4G data subscriptions not undercut PTCL’s rapidly growing broadband operations? Walid offered the contrary, noting there will be more fixed broadband. “Substitution, that happened in voice from fixed to mobile, won’t happen in case of broadband – it has not happened anywhere. Mobile broadband is great but there is limitation on consumption, as operators cannot match what we can offer on fixed broadband. A person will use mobile broadband while s/he is moving around. But when they come to home or o�ce, they switch to Wi-Fi at home or o�ce. You cannot consume 10GB on cellular but that is custom on fixed broadband. I feel that after 3G, appetite will grow for fixed broadband: that will mean more customers and more usage for our services. 3G will be a catalyst for more fixed broadband subscriptions,” he reasoned.

Wholesale Bandwidth MarketThe 3G operators are all going to need backhaul facilities for smooth data tra�c management. PTCL is a major player in that wholesale market. Walid emphasised that for broadband, every element of the ecosystem has to be ready and continuously upgraded. Walid noted that 3G/4G tra�c is going to bring an explosion in data volume, and that PTCL expects that and is prepared for the data offensive. “In terms of capacity, we are ahead of the demand. If broadband demand is 1 unit, we believe in multiplying it by 10 and then prepare to meet that. We’re revisiting our technologies and platforms and networks to accommodate our own tra�c and the envisaged 3G/4G tra�c. For 3G, we have started working on our fiber backhauling, and as the fiberization is going on, we’ve been in discussion with all the MNOs. We are making more major investments in connecting Pakistan to the outside world. In 2016, we will see the 4th submarine cable – Asia-Africa-Europe (AAE1), from China to France – coming into service, with very high-speed bandwidth,” he explained

What about Voice and LDI?When asked recent revival in landline telephony, which was once the legacy-PTCL’s bread and butter, Walid noted that broadband services have been driving that positive trend. “People requiring broadband also come to take back their PSTN line. Then there are other reasons, too. In recent years, during days of cellular closure, people realized that sometimes they needed landlines. Better installation and maintenance works have also contributed in the resumption,” he informed. But he cautioned that Pakistan’s landline subscription density is among the lowest in Asia. “We should target a minimum double the current subscriptions (3.04 million fixed line subscribers as of September 2013) and we have the capacity to do that. We have broken the back of the voice substitution trend, a rarity, but we would be happy when subscription growth rate picks up,” he said. Walid declared that the days of plain-vanilla PSTN are over. “Bundling is the way forward: Broadband; Wi-Fi; voice; TV. Almost 50 percent of our PSTN customers have broadband – five years ago, it was between 2-5 percent; that says something about the trend. Instead of IPTV, we are now aggressively moving on video delivery on our PSTN lines,” he shared.

Need for Enabling RegulationsWhen asked to specify the key areas in need of policy interven-tion, Walid suggested a number of measures through which the industry can become a catalyst for growth: “It would help if spectrum is made available to the industry regularly, that’s one area. Then there are issues like right of way, and infrastructure sharing, which is still in the talks phase. Fiber is important because it’s a national asset and investment, so putting in fiber should be made less cumbersome from regula-tory standpoint. Then telecom taxes are very high and that hurts service consumption and industry growth,” he noted. But the PTCL President was quick to add that the industry is not asking for favors or concessions or subsidies; it is only requesting facilitation and supportive regulations that meet the aspirations of the industry and population. “The industry is facing extended power cuts even as utility and fuel prices have gone up in recent years. PTCL is running on an average 15 hours on backup generators in many parts of Pakistan to provide services. But we have learned to live with this because whole country is suffering from this,” he contextualised his point.

BR ICT REVIEW

Interview by Ali Khizar and Hammad Haider

I N T E R V I E W P T C LW A L I D I R S H A I D

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“For Telenor, 3G is not a sprint…”When BR Research sat down with Michael Foley, it soon became clear why the gentleman was chosen as the newest CEO of Telenor Pakistan, which recently obtained a 5MHz spectrum license for 3G services rollout. Foley’s career has spawned roles in developed markets as well as developing countries in Eastern Europe and Africa, sometimes building networks from scratch.

ike his peers in the industry, Foley is aware of the demons of the past, when intense price-competition in mobile voice segment led to lower industry margins and uneven QoS. “In the data market, it is clear that our revenue streams must increase enough to provide

return to the investors. But they also can’t increase out of control so that we are not competitive. It’s a balancing act. Somewhere in the middle we will find that balance,” he pointed out. He hopes that the industry would come together in lowering systemic costs through sharing networks, spectrums, and backbones. “Those are the areas where we do not need to compete, so we can lower costs to find a balance to offer great products, a great price and then a return to our shareholders.” When asked about Telenor Pakistan’s pricing strategy at this early stage, Foley explained that it is critical to create enough trials early on, for which pricing has to be attractive and affordable. “We have a position that says, ‘Internet for All’, which is fundamental to the economy’s competitiveness. So, pricing has to be of a nature that allows us to attract clients to our network but also provides a good return to shareholders. Our pricing is going to be dynamic and very competitive and will offer great value to customers,” he said.

Telecom TaxesBut such a pricing model cannot achieve its often-competing objectives of customer value and shareholder return if applicable taxes remain high. Foley agrees, and offers the company’s view that the level of taxation in Pakistan’s telecom industry is not entirely aligned with the objective of creating an economic competitive advantage for Pakistan through wide availability of data services. “Pakistan has the third-highest telecom taxes in the world after Turkey. The industry needs some help in that area, to get the product to the poor and remote regions. We understand that the state needs revenue and direct taxation is di�cult. But this is an infrastructure-based industry and we need to get these services to the bulk of people as soon as possible. We had a good discussion with the authorities on this issue,” he said. But such issues do not seem to be getting in the way of new investments, yet. Telenor is currently in the process of working through a three-year plan for the country. “Our investors are highly committed to Pakistan, and to the team here. They realise that growth will not come from Europe. Growth will come from the Asian business units, in particular Pakistan that has a great opportunity with 3G, which is nascent here. So they are all over us, supporting us, and there will be a lot of investment continuing into Pakistan over the next number of years,” he said with a smile hinting there will be no more details.

Adoption Rate and Rollout PaceFoley maintains that 3G adoption in Pakistan is going to be faster than anywhere else in the world, because the demand is really pent-up. However, he makes it clear 2G data will also be on the menu. “Data offerings over 2G networks would be entirely su�cient for some clients for a period of time. We are now pushing data services more aggressively on both 2G and 3G.” When enquired about rollout plans and their pace, Foley stated that by the end of this calendar year, Telenor would be offering 3G data services to 60+ cities – a number that far exceeds the o�cial rollout obligations. “O�cial requirement is what it is – our commercial requirement is different. I cannot tell you the number of subscribers we are targeting, but we expect to have millions of subscribers doing data on our network over the next two to three years. That won’t happen organically; we’ll have to work with other players, change the handset ecosystem, and look at commercial levers to get people to try products.” he explained. All this is going to be hard work. “We want to make sure there is a contiguous experience on data networks. Spotty 3G service is not an optimal experience because handoffs sometimes have issues on

data. So we decide to put in a nucleus first and then grow from there. Our commercial, financial and technological teams actually sit together to build the best customer experience possible,” he shared. “We have many second and third-tier towns in our rollout plan, besides a lot of our rural area. Just like voice, data has to be for everyone. Yes, segments exist but our service will not be exclusive,” he emphasised. If the rollout is going to happen fast (relative to license obligations), should we expect Telenor’s 3G network to eventually match its 2G coverage, and over what timeframe? By prefacing that no company can possibly achieve 100 percent coverage, Foley’s guess, upon insistence, is that within 36-48 months, or even earlier, a maximum 3G coverage can be achieved. But to achieve that, wouldn’t Telenor Pakistan need more spectrum? Foley maintains that while 5MHz would be good enough for a 2-3 years’ timeframe, the company may, at some time in the future, may go for more. “The 5MHz spectrum is more than enough for what we need now. We don’t have any desire to go for more immediately. Let us be very clear that over the last decade, the ability to get maximum e�ciency out of spectrum has gone up very much. We can do a lot with the spectrum we have.”

Building an EcosystemWhile the issue of laying down the mobile broadband highway is being gradually addressed now, concerns linger about the affordability and quality of vehicles (handsets). Foley agrees that we have a problem there: “Things we have under our control are building networks and providing the product. What we have to work on more than anything else is the device ecosystem. The challenge is that a lot of devices being pumped into the market do not have any data capability at all, something over which the industry has little control. We want to get that sorted out fairly quickly so that we can get more people to try our services.” But changing the device ecosystem to have data-capable handsets is also an opportunity, he said. “There will absolutely be some cooperation with the vendors. We won’t be building the hardware, of course, but we’ll partner with the manufacturers to bring appropriately-configured handsets to the market; reverse bundle and brand; all those things are on the cards. We are currently working on which lever to pull first. We can also leverage our ecosystem across Southeast Asia, for Telenor businesses in this region have faced similar challenges.” Foley also lays emphasis on providing more than just internet. “We are providing services to our clients in Urdu and other languages and services for people who can’t read. We have already started with a mobile application store, where we are allowing people to use credit on their phones to make in-app purchases. We will facilitate developers to create more applications and products for which we will continue to encourage young people to come up with content and applications through Apportunity,” he a�rmed. Despite the 3G rollout hype, Foley resolves that voice business expansion would be a priority for Telenor Pakistan even in this new phase. He believes that “voice” is absolutely critical, and “it’s the basic empowerment”. “Twice in my career, I have built networks in areas where phone service arrived for the first time and it was transformative for people. If you take away multiple-sim (phenomenon) from the roughly 80 percent teledensity – the jury is still out, but the actual teledensity is probably around 55 percent level – then that demonstrates a lot of opportunity for growth. Years ago when we entered this market, we grew from the outside into the cities. We have a large population of rural clients who are served well by us and there needs to be a lot of growth in those areas. In urban centers, too, growth is possible.”

BR ICT REVIEW

Interview by Sohaib Jamali and Hammad Haider

I N T E R V I E W T E L E N O R P A K I S T A NM I C H A E L F O L E Y

08

I N T E R V I E W Z O N GG E J I A N B A O

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“China Mobile to invest over $1 billion in 3G/4G within 3 years”Ge Jianbao is the acting CEO and Chief Financial O�cer of China Mobile Pakistan (CMPak), the corporate entity of Zong. He has vast experience of over 20 years in the telecom sector in China after which he joined Zong in February 2013. His career path comprises many areas within the telecom industry including finance, human resources, strategy, corporate governance etc. and is acknowledged as a very senior finance professional in the Chinese telecom industry.

Research: How do you see the demand for data services in Pakistan?Ge Jianbao: The evolution of mobile internet is much slower in Pakistan than it is in other countries but it is indeed an opportunity for any operator to invest in Pakistan’s

data market. We have seen that it is the youth across the globe which enjoys advancement & new technologies and consumes information from the worldwide web. A very large percentage of Pakistan’s population comprises youth. Zong is confident that in the near future there will be a great demand for data services and we look forward to fulfilling the needs of the ever evolving consumer.

BRR: Long seen as a budget operator in the 2G market, how is Zong position-ing itself in the mobile broadband era? GJ: If we talk about the new era, we have very aggressive rollout plans for 3G services. Till date (since the spectrum auction), we have rolled out our 3G network in more than twenty cities. In 4G, we are the pioneers and the only operator in the country offering this most-advanced technology. The launch of 4G has brought the Pakistani telecom industry at par with rest of world within six months of the licenses being awarded. This is a reflection of our commitment. We have so far provided our 4G services in 7 major cities, including the federal capital and all four provincial capitals. So, with Super 3G+4G, we are number one in terms of rollout and customer numbers. Zong is the fastest growing operator in the country and we recently announced that we are the first telco to reach 1 million 3G customers. If you go back five to six years ago, Zong was a very small operator, at the bottom of the chart. But earlier in the year we became the 3rd largest operator in terms of subscriber base. In the past few years, we have added more than half of the net additions of customers to the industry. In three years, we got half of the new market onto our network. This has all been possible as Zong has invested $2 billion in the growth of the industry, alongside our employees’ undying efforts which have helped shape Zong into one of the main contenders in the Pakistani telecom sector.

BRR: It’s still too early, but how has the market response been to Zong’s data services so far?GJ: I think people are now very interested in using the 3G and 4G services. However, it will take some time to develop the market. We need to focus on the value chain and the entire ecosystem, which includes networks, handsets, applications, and our products. We would like customers to immediately start using 3G or 4G services but this will take some time as most of the handsets been used by customers in Pakistan are not smartphones. Besides, there are very few handsets which support 4G and those which are available have a very large price tag. However, Zong is trying its best to fulfill each of the requirements and create a one stop for all. Zong is not only providing data services, but is also introducing a highest quality, competitive & low-priced 4G handset, the M811, which is a self-brand owned by China Mobile. We will hopefully introduce more 3G & 4G handsets into Pakistan. It is essential for us as an operator that the consumer has the necessary handsets at economical prices to empower the entire Pakistani cellular user base.Our parent company China Mobile is globally the No.1 4G operator with top-level speed of mobile broadband in the world. I do believe Zong as a part of China Mobile can bring Pakistan to the same level as that of China.

BRR: Do you think the continued YouTube ban is negative for 3G and 4G adoption in Pakistan?GJ: I think that Pakistan should launch some localized version video service to address needs of local users. We can provide any support desired through our open platform to let this dream come true for the people of Pakistan as true enablers and the digital life partner.

BRR: We have heard about China Mobile planning to set up a handset manu-facturing plant in Pakistan. Could you please share some of the details with this publication?GJ: We are coordinating with Chinese handsets manufacturers to start manufacturing handsets in Pakistan. So far we do not have specific details to share. But I can tell you that we are talking with the Ministry of Information Technology to work on a plan to bring in such companies. The project could materialise in more than one way: China Mobile can enter into a joint venture with a handset manufacturer in China or invite and involve some local player who has interest in investing in this project in the future.

BRR: Leaving aside the possible future handset manufacturing, how much investment is China Mobile going to make in its core connectivity business (Zong)?GJ: China Mobile intends to invest over $1 billion in Pakistan within three years – that’s just for 3G and 4G. After that, if we can take benefit of market demand, I think that we will not take back our profits and we will continually invest in Pakistan. This will all be sponsor equity from China Mobile.

BRR: What would you like the government to do to make your investment more fruitful here?GJ: We face a lot of challenges in this market. Due to economic conditions and other issues like security, power shortage and infrastructure, it is usually not easy for any mobile operator to get major benefit from the market. For our industry, tax burden is a big challenge. We understand that in Pakistan there are not many developed industries to provide taxes, but the government should have some mindset and concept to let our industry have the opportunity to go to the future. Around 40 to 50 percent of our revenues go into taxes or government fee, making Pakistan as the country with almost one of the highest tax burdens in the world. One SRO has been deleted as custom duty increased by 15 percent right after 3G/4G license auction. That has impacted rapid development & rollout of 3G/4G. The whole telecom industry are expecting appropriate custom duty rate, so that Pakistan can benefit exponentially. The whole ecosystem around 3G/4G will pay back to the economy heavily including tax on mobile revenue and more employments. A localised challenge like power shortage is another major issue for the industry. Then there are security-related tasks. We have to ensure and appoint guards for the safety purpose of our BTS sites, which is seldom seen in other countries. This is also a huge cost burden for mobile operators. However, I think Pakistan is a country with a lot of potential and development opportunity. We are keen to invest here. The government is easy to approach, they are thinking on the lines on how to support the investor for enhancement in the country and sooner or later we have to pay attention to profits. As a member of the executive management in CMPak and an ambassador for Pakistan at the China Mobile, I shall continue to create opportunities to bring more investment to Pakistan. I consider myself half-Pakistani, and it is in that spirit I share my concerns.

BR ICT REVIEW

Interview by Sohaib Jamali and Hammad Haider

09

A R T I C L E P A R V E Z I F T I K H A R

A

Spectrum size does matters part of my presentation at e-India 2008, in New Delhi, when I proudly presented the slide of regional telecom develop-

ment (see figure) showing Pakistan ahead of all regional countries, little did I know that it was in fact the beginning of a long era of stagnation for telecom sector in Pakistan. Thereafter, where the teledensity in Sri Lanka soared from 51 percent to nearly 100 percent, Indian teledensity from 24 percent to 75 percent, Pakistan’s teledensity crawled from 57 percent to 75 percent. There had been many reasons of the success story at that time, but the telecom policies (there were several: Cellular Mobile Policy, Broadband Policy, USF Policy, etc.) and deregulation reforms of 2004 were at the top. Those policies and reforms were probably the best things that could happen to a sector in a country. But the policies were supposed to have a lifespan of five years. Nothing happened for the next ten long years. Therefore the biggest achievement of the present government in the field of ICT will not be the 3G/4G auction, nor winning the seat in the administrative council of ITU, rather will it be the formulation of new ICT policies, in consulta-tion with the stakeholders. We are not there yet, but work is underway to formulate a telecom policy, with the assistance of an international consultant, funded by the World Bank. A couple of rounds of stakeholder consulta-tions have been held and it appears likely that the new telecom policy will soon see the light of the day and set Pakistan’s telecom development on the right trajectory to regain lost glory. Some of the elements that are important in that context are discussed briefly below.

BR ICT REVIEW

Parvez Iftikhar is an ICT policy expert who has formerly headed Universal Service Fund and Siemens Telecom in Pakistan. He has recently formed a think-tank named ICT Forum, Pakistan. He writes regularly on www.piftikhar.com and can be reached at parvez@piftikhar.com

No amount of spectrum is enough, particularly for our last-mile needs. But spectrum should not be too expensive for our consumers, as it is they who pay for it in the end. The last spectrum auction for 3G and 4G in April, though successful in many ways, did leave much to be desired in that respect. How? For another few years, wireless broadband would not be available to a majority of our people (more than 60% are estimated to be living in rural areas). Lax operator license roll-out obligations allow that to happen because government’s focus on getting upfront cash was too high on the agenda. Pakistan‘s hunger for broadband can be gauged from the claims of cellular operators, that 3G users in cities have crossed 3 million mark – effectively equaling the number of broadband subscriptions in the country – in less than six months! Spectrum policy needs other drastic improvements as well, like in spectrum trading and re-use, so that situations are avoided where precious spectrum is lying unused on one side and some operators are craving for it on the other.

If spectrum is needed for the last-mile, Optic Fiber Cable (OFC) connectivity is needed for the backhaul. It is impossible to provide inclusive development to our burgeoning population without the help of ICTs. Fortunately, computing power of the devices is doubling every year and prices are tumbling. According to the well-respected technology research firm IDC, smartphones are already replacing PCs and laptops. On the other hand, videos, which are the most effective way to teach our villagers, are bandwidth-hungry. Therefore, massive amount of bandwidths will be required in the backbone/backhaul networks, which is only possible through OFC. Thus any rapid and inclusive economic development in the future will also need increasing the fiber penetration in the country. That is why it was expected that ‘Fiber to Tehsil’ program of USF would be followed by a program of ‘Fiber to Union Council’ – for all of the six-and-a-half thousand UCs in the country.

There are all kinds of indirect taxes in Pakistan but the usage tax on telecom is one of the worst. It directly impacts use of ICTs by the poorest sections of the population. A large proportion of this tax is adjustable in the annual income tax – precisely what the poor cannot do, ironically because they are supposed to have been exempted from taxes. These days, phones (particularly smartphones) are considered to be productivity-enhancing tools. To discourage their usage by charging high usage tax amounts to putting breaks on productivity enhancement, and thus detrimental to inclusive economic growth..

The story of USF has been the same as telecom policy. On May 7, 2010, Indian newspaper ‘Business Line’ (belonging to ‘The Hindu’ group) headlined: “Pak ahead of India in use of Universal Service Funds”. Among other things, Pakistan was among the first ones in the world to start using USF for optic fibers. Its neighbors followed suit and today they are extending fibers to each of the 250,000 “Gram Panchayats”. Now it’s Pakistan’s turn to emulate. With nearly a billion dollars in the kitty of USF Pakistan, a little bit of will and some hard work is required. The government announced a program of 500 broadband Telecentres half a year ago. Something is better than nothing if it is not so painfully slow in taking off. As for ICT R&D, little said the better. After all what can one say about an organisation where, in the last four years, a full-time CEO existed for only half a year? In both cases, the industry representatives cannot be absolved of their responsibilities.

Doing all of the above would be a big waste unless there is useful content that can educate and enhance the skills of the masses. Educate not just in the conventional sense but also teach modern techniques in agriculture, farming, livestock, commerce, fish-farming, growing fruits and preserving them for home and foreign markets, how to setup and run businesses, how to live hygienically, to name just a few of the endless possibilities. Content is not the responsibility of IT ministry alone. Other ministries – both at the federal and provincial level – have to play their part. To give an example, agriculture ministries and departments enjoy substantial rural presence with thousands of field workers who help, guide, or teach the farmers. Now with ICTs, they can be made more effective by providing them with smartphones, which are pre-loaded with videos that demonstrate those new ways and methodologies that the farmers need to learn. In the future, as smartphones and mobile broadband become more pervasive, farmers would be able to download such videos themselves whenever and wherever required. Such videos can only be prepared by our local agriculture specialists with the help of public/private sector IT experts, not by IT experts alone.

The government’s role does not end here. There is enough evidence available that ICT development comes when governments themselves become the biggest users of ICTs. Federal ministry of IT is working to spread the use of e-o�ce in all federal ministries. But the use of ICTs in the government has to take a quantum leap – from e-o�ce in a handful of ministries and mere downloading of some forms by the citizens, to complete e-governance. To start with, transactions between the citizens and the governments should start taking the broadband route. Take the example of branchless banking: why can’t we pay government dues, like annual vehicle tax or abiana, through mobile banking? Why must we spend our precious hours standing in queues (or pay someone to do so) to pay government dues? It is not that no such content-development work for e-governance is being done in Pakistan. Some provinces are doing better than others. But most of it appears to be carried out in piecemeal manner (look at vehicle number plates of different provinces, they appear to come from different countries), and none of the work is being shared among the center and/or provinces. There seems to be no effort to learn from each other, replicate or avoid duplication, and thus waste. There is an on-going ITU/NIPA (South Korea) assisted initiative of an e-government master plan (of which I happen to be a part from the ITU side) but that deals only with the federal government. Comprehensive nationwide medium- and long-term e-government plans must be formulated and implemented by the center and the provinces jointly, which is only possible if the top leadership takes ownership and pushes for implementation. Indeed all this would take years, but we need to hasten up so that we can again start proudly presenting Pakistan ahead of others!

Spectrum:

Fiber penetration:

Taxes:

USF and ICT R&D funds:

Content:

e-governance:

Cellular service growth over the years (%)Cellular teledensity Subscription growth p.a. (Rhs)

0

40

80

120

160

0

20

40

60

80

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Upto May-14

Cellular market share (%)

FY11FY12FY13UPTO MAY 14

FY07FY08FY09FY10

MOBILINK TELENOR UFONE WARID ZONG

FY09

FY10FY11

FY12

FY13Telecom industry revenues - Rs (bn)

Cellular revenues

190

200

210

220

200

240

280

320

FY09 FY10 FY11 FY12 FY13

(Rs bn) (Rs per month)

ARPU (Rhs)Revenue

Shares in annual subscriber acquisitions

-50

-25

0

25

50

75

FY07 FY08 FY09 FY10 FY11 FY12 FY13 Upto May-14

(%)

Mobilink Telenor Ufone Warid Zong

44.6

49.4

44.0

52.6

57.8

58.2

19.2

14.2

6.6

7.2

7.5

7.5

10.9

9.2

13.6

12.0

14.6

5.3

37.0

39.3

44.9

45.2

53.5

53.5

FY08

FY09

FY10

FY11

FY12

FY13

Telecom industry's annual tax contribution -Rs (bn)GST Activation tax PTA's deposits Others

10BR ICT REVIEW

KEY TELECOM INDICATORS

6,334

7,737

16,212

11,995

InvestmentsOverall telecom investment FDI in telecom

-500

500

1500

2500

3500

4500

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

$ (mn)

23

61

152

222

278

316

FY08

FY09

FY10

FY11

FY12

FY13

21

54

131

178

200

214

SMS trendSMS sent (bn)SMS sent per subscriber per month

Broadband subscriptions (mn)FY08 0.17

0.41 FY09

0.90 FY10

1.49 FY11

2.10 FY12

2.72 FY13

3.63 Upto Apr-14

% share in broadband subscriptions

FY09

73

27

FY10

59

41

FY11

49

51

FY12

44

56

FY13

41

59

Upto Apr-14

37

63

Fixed Broadband (DSL, HFC, FTTH) Wireless Broadband (EvDO, WiMax)

100

FY05 FY07FY06 FY12FY10 FY11FY09FY08 FY13Upto Dec-13

0.3 1.0 2.92.7 2.72.62.2 3.1 2.6

5.3 4.85.2 3.03.4 3.03.5 3.0 3.0

Telephony subscriptions (mn)

4.4

1.7

FIX

ED L

INE

WIR

ELES

S

Pakistan calling(outgoing minutes per subscriber per month: local +int'l)

FY13

203

FY12

141FY11

114FY10

69

Pakistan's LDI tra�ic (mn) Incoming minutes Outgoing minutes

FY09 FY10 FY11 FY12 FY13

2,886 3,209 3,629 3,979 2,409

6,034

11BR ICT REVIEW

Data source: PTA

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I N T E R V I E W H U A W E IN A D E E M M A L I K

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Focus on ICT usageA software engineer, Nadeem Aslam Malik is the Country Director of Huawei Technologies Pakistan, where he has served for the last four years in Enterprise Business Group.

Research: Tell us a bit about Huawei. Nadeem Malik: Huawei is a leading global ICT solutions provider with revenue over $30 billion from over 140 countries. Huawei Technologies currently provides the network

infrastructure for 45 of the world's top 50 operators serving a third of the world's population. One of Huawei’s strengths is its R&D, on which the firm spends 10 percent of its annual revenues – other vendors spend about 2-3 percent. Huawei has recently organised into three distinct business groups. One is the carrier group, which looks after carrier network infrastructure side, still the largest business. Second is the enterprise business. And the third division is our device division, where we provide devices like smartphones, tablets and wingles. The three-word strategy – cloud, pipe and device – are for an era where everything is residing somewhere and people would be remotely accessing data and applications.

BRR: How do you look at Huawei’s presence in Pakistan?NM: Huawei has been present in Pakistan since 1999. Pakistan was among Huawei’s first overseas expansions. Besides the Pakistan-China relationship and the geographical proximity, Huawei saw that population growth or opportunity growth in Pakistan were the best in the region. Pakistan was the last one to go to telecom deregulation, so that was a huge opportunity. And Pakistan is a very friendly country for the Chinese. In Pakistan, we have about 1,500 full-time employees, 400 of which are Chinese. We are organised in the country on the same three divisions. We hold leadership in our carrier business (the network), e.g. Ufone, Mobilink, Zong and PTCL are the major customers. The bread and butter in Pakistan will remain telecom infrastructure (network). The second growth driver for Huawei Pakistan will be ICT or enterprise services where we will be offering cloud data centers, storage, servers, collaborations and videoconferencing to public and private sectors. If this business grows, the device business will grow automatically. Enterprise is kind of a driver on both ends, as it has to give end-to-end value proposition to, say, the education sector.

BRR: As an organisation whose bread and butter depends on ICT spending and usage, how do you see the situation in Pakistan?NM: There are four pillars or sectors of ICT spending. One is the government, and historically, major ICT spending has come from the governments across the world. . Second is usually telecom industry; third is financial service industry, which is 100 percent IT-dependent. Fourth is commer-cial sector, which includes manufacturing, transportation and SME market. Now the top tier, the government, has been least adoptive in Pakistan. They have not utilised ICT, I would say, even upto 1 percent of what should have been. There are major issues with existing ICT spend: it is too low; it takes too long; it is spent on non-essential project; so whatever is spent is least valuable. Telecom sector has been the heaviest of the users in Pakistan. They have also come up with innovations, like mobile financial services. Financial sector is also strong in ICT spending, but their spending has not reached the potential yet. As a result, the financial density is low, because branch levels are low and accountholders are very low for a population of 180 million.

BRR: How do you see ICT adoption in industrial sector and at consumer level?NM: Unfortunately, Pakistani businesses in the industrial or transportation sectors try to copy the programmes and utilizations in developed economies. They miss the point that it is localisation which can fulfill the local need. Commercial utilisation has not been thought out, and the blame goes to regulators, businesses and ICT providers. Now the payment gateway guidelines issued by the central bank are a major killer for the ICT industry. But it is still the business that has to reach out to users. For instance, e-tag lanes must be compulsory at motorways and all; vehicle registration plates must have RFIDs so that government can collect tolls and vehicle taxes right away.

Current situation is a major reason why a common person is still not using the ICT services s/he should already be using. Look at the tra�c jams: people still have to go from one place to the other to do something manually when the same could have been done online or on mobile. The masses never demanded mobile commerce; it was the provider who took a step, which was brave and innovative. ATM was not demanded by the customer either. ATM was created as a distinguishable comparative advantage.

BRR: How are things looking after the introduction of “transformative” 3G and 4G network technologies to Pakistan?NM: As for us, all three Huawei divisions in Pakistan are seeing growth following 3G auction. There are opportunities. With mobile broadband, connectivity – along with solar solutions – will help in off-site solutions like off-site ATMs and E-services kiosks, in remote areas. Huawei is looking towards key critical projects specifically in the government sector. But generally, 3G and 4G are a better pipe. It’s just like a motorway compared to the GT Road. Motorway itself is not going to do anything for you. It all depends on how you use it. If you make more exits, there will be more communities to connect. Now, how to use the bigger, wider 3G/4G pipe is not the sole responsibility of the operators, who are already invested. It’s the other sectors, like the government sector, which can reach out to the public, or the financial sector, which can find ways to increase the banking population. It’s the industries that need to be brought on board now as well. Only then can ICTs can create more job opportunities. Punjab IT Board has been doing great work in the public sector. Among other things, they have adopted videoconferencing within Punjab government, which is a good step given the security and mobility issues. However, I think one area which they must prioritize is increase the internal e�ciency of the provincial government. Pakistan has historically been a data hungry population in terms of online content viewing and downloads. That’s why we encourage digitization and localization of content and third-party providers.

BRR: How have Huawei smartphones been doing in the local market? What’s the device strategy after 3G/4G ?NM: Huawei is number three in the world behind Apple and Samsung, so we do not compete on price. We are still relatively new entrants in the handset market in Pakistan, which is very promis-ing. We are very happy with the numbers here. I think smartphones are going to grow and a lot of tiers of smartphones are going to grow. And by the way, Samsung is my competition, not QMobile. We do have a device strategy following the 3G/4G auction. All our handsets in the market are now 3G-enabled. We are also partnering with carriers to offer special bundles and packages. But Huawei is not confined to smartphones only as “device” includes tablets, small 3G and 4G wingles, dongles and CPEs, which are all part of our offering. Huawei strategy is not confined to the user of 3G connectivity; it’s about the business connectivity and home connectivity as well. I think that the largest smart-device user will be our education sector. If you include primary and secondary education as well, education sector will be one of the largest drivers. So, adoption has to come from them. What kind of devices do they need? Middle schools will need rugged devices. University level students will require devices that are bigger and have more horsepower. What I am saying is there is need for multiple devices in the market, for different segments. That’s what vendors like us are interested in finding out how this market develops and segments.

BRR: Will Huawei be interested in manufacturing smartphones in Pakistan?NM: That is a question which I cannot answer at this point in time. There is a possibility. Again, the penetration of smartphone is currently low in Pakistan. Where the market is heading, we don’t know yet.

BR ICT REVIEW

Interview by Ali Khizar and Hammad Haider

13

I N T E R V I E W C I S C ON A V I D Q A Z I

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“Pakistan has phenomenal IT talent”An electrical engineer, Navid Qazi is Cisco Systems’ Country General Manager for Pakistan. Including last ten years at Cisco, Navid has around 20 years of experience in emerging markets, working with technology firms including Siemens and Nortel.

Research: How has Cisco organised its business in Pakistan? Navid Qazi: Cisco has been doing business in Pakistan for about 20 years. Cisco’s business here is mostly organised around service providers, enterprises and mid-market

customers. Our major customers here are in the telecom industry. Large enterprises like banks, manufacturing concerns, defense and public sector enterprises are also among our major customers. Banking industry is a pretty large customer of networking and connectivity. Dependence on ICT in our daily lives is gradually increasing, allowing people to be more productive. We are seeing internet-based merchandise market slowly taking off in Pakistan. Therefore, the consumer segment is one area where we are looking to increase our presence in Pakistan. If consumers require some compute capacity and software solutions, we can deliver more elastic, cost-effective cloud based services through our partners.

BRR: What kind of growth has Cisco Pakistan witnessed in the past decade?NQ: Our business in Pakistan has remained on a growth trajectory. There was a pretty steep growth in our business here between 2000 and 2007, driven primarily by telecom deregulation. After that, there had been a period of consolidation where companies saw a flat trajectory. For the last couple of years, the market has been growing again. A lot of service providers and banks have been doing technology refresh to catch up with the latest technology. Our average revenue in Pakistan, over the last decade or so, is around $40 million per annum – going as high as $72 million. Since Cisco’s business here is geared more towards infrastructure buildup for large projects, there are periods of high and low revenues over the years in tandem with the market’s infrastructure spending. But because we have systems integrator partners and resellers in this market, about 90 of them, every dollar of our sales is roughly about 2-3 dollars in the end after adding services, importation and allied third-party gear. Besides local sales, we are also focusing on Pakistan as a market from where we can source local talent at reasonable cost for our global operations. Cisco Global Business Services now have a footprint in Pakistan to support our global business operations.

BRR: What kind of growth prospects are you seeing in the next few years after 3G/4G rollout is into play?NQ: 3G and 4G provide an opportunity to have more meaningful transactions. The ability for citizens in remote areas to access certain services online can also increase considerably. But there is a need to augment mobile broadband with some fixed-line connectivity to tier-2 and tier-3 cities and towns for remote healthcare and education solutions. If you have a basic technology footprint on the remote end and you make a value chain that is economics-driven, people can cut costs, save time and get quick service in the social sector domain. You have to energize private sector for that to have sustenance and innovation. As Cisco, we are optimistic on Pakistan on two counts. First, Pakistan is an exciting emerging market and there is a lot of ICT infrastructure to be built up here on basic connectivity level as well as in advanced technology. Second, now some service-related businesses – such as education and healthcare – also offer a potential market for connectivity infrastructure. If those two factors are accompanied by some macroeconomic stability, you could see lot of things happening in the ICT space, extending to sectors such as transportation, oil and gas, electricity, and manufacturing concerns.

BRR: What are your policy recommendations for fixed infrastructure?NQ: First up is the fixed-line infrastructure. Same as a road, fixed infrastructure’s ROI is not visible at the outset but it can deliver great socioeconomic benefits. We really need to increase both fixed-line infrastructure and usage. We also need to have a national broadband strategy agreed between relevant stakeholders and government-led initiatives to catalyze investment. Several other countries are already working on this considering broadband as a utility. The current draft of new telecom policy does not really allude to such an environment.

BRR: How do we prioritize fixed infrastructure investment?NQ: Fixed-line offers the stickiness for a lot of services. It allows you to build a model for large-scale citizen services. Revenue-generation is not an issue in fixed broadband uptake. It's more to do with high upfront capex and logistical issues such as right of way. Right now, it is only PTCL that's into fixed infrastructure expansion – rest of the players are either not sizeable, are not nationwide or don't have the finances behind them. In such an environment, governments usually intervene by giving tax concessions and right of way concessions to anyone undertaking fixed-line infrastructure investment. It can follow the example of countries like Australia, where they have set up a National Broadband Company that is mandated to have a minimum percentage of broadband penetration, both fixed and wireless. Such organisations are catalyzing fixed-line infrastructure investment in about a dozen countries. If we start today, we can make a major difference in two years. BRR: USF has a similar mandate but government is sitting on its pile of cash. Is USF relevant to this intervention? NQ: It certainly is. I think USF needs to sit together with three or four sectors and try to come up with a value chain that a) impacts people in underserved and remote areas b) can generate new business models for entrepreneurs, and c) can increase business for fixed-line infrastructure providers. That is the theme that we are trying to talk about with the government, private sector and other CSR-minded organisations. Now there's a lot of buzz around Telecentres but USF is also trying to figure out what kind of services they will include. I feel that Telecentres should have five or six modules of government citizen services and then opened up for the private sector. For instance, secure Telecentres can meet the need of banking sector that wants to open basic banking; low-staff branched in rural areas.

BRR: You mentioned that Cisco Pakistan’s local talent is helping out in overseas operations. Can you share more details?NQ: Cisco has a global business acceleration center which helps introduce new products and technologies to our teams, partners as well as customers. It’s a business value-addition team on which Pakistan has its representation through presence in Cisco’s Islamabad and Karachi o�ces. Cisco started investing in this unit in Pakistan couple of years back and the feedback from our corporate unit that handles this programme is pretty encouraging. Right now, I have more people in my o�ces working for global operations than for local business. Cisco really believes in value of talent from Pakistan.

BRR: What are the reasons behind the demand of this local talent pool? NQ: The quality of talent that we get here is world-class from a cost perspective. We have skilled manpower. We have a vibrant education system. We really need to scale that a bit further. In the very short- to medium term, Pakistan’s ability to generate product revenues for companies like Cisco is significant but there are probably other global markets that would offer bigger promise in dollar terms. But Pakistan’ ability as a market where you can train, recruit and enable local talent to galvanize global operations is phenomenal. If we can really get going as an industry in that direction, more and more technology companies can house some of their operations in Pakistan.

BRR: So what is needed to nudge everyone concerned in that direction?NQ: I think we need more tier-1 companies to take the first step and have their setups here, not just to sell to this market but to leverage the skilled workforce available here. At Cisco, we are already on this path. Most of the big companies in the US that have taken the plunge in Pakistan, like Teradata, are doing great and their consultants are in large demand. Government can play a big role because there are, at times, infrastructure vulnerabilities and law & order situation, which makes it di�cult to serve global customers who have to be served at all times.

BR ICT REVIEW

Interview by Sohaib Jamali and Hammad Haider

ech folks are fond of drawing analogies. Here comes an analogy from a non-tech person. In the ICT scheme of things, fixed infrastructure is like a motorway, smart

devices – smartphones and tablets – are the branded cars and broadband connectivity is the fuel. Ceteris paribus, a smooth and extensive road network would enable you to go places. Similar is the case with fixed infrastructure, which is the backbone of all types of broadband – fixed, wireless and mobile. Without it, connectivity might still be there but it will be patchy and spotty, just as a bumpy country road is inconvenient and costly to your car’s health and yours. Fixed infrastructure is a complex beast that is expensive to tame. It is enabled by different kinds of technologies, but the most common ones are fiber optic cables (they come in various forms), submarine connectivity (which are nothing but inter-continental fiber optic cables), and some form of copper wiring for area-specific, last-mile connectivity. The term ‘last mile’ is used to denote delivery of telecom services to retail customer: household or enterprise. Put simply, fixed infrastructure is required for both trunk connectivity (inter-district and inter-city connectivity among operators), and last-mile connectivity. As explained later, Pakistan is lagging behind on both these connectivity enablers. Specifically, expert arguments for enhancing fixed-line infrastructure can be clubbed into two types: strategic and economic. First, investment in fiber optic networks creates an infrastructure that is said to be more resilient than wireless networks, which are relatively easily compromised by cyber espionage and hacking. Agreed that fixed-line is not failsafe and it comes with its own limitations, but thanks to technologies like “self-healing” fiber optic rings, it is now rare to have a cross-country landline shutdown due to events in one region. In that way, fixed infrastructure becomes a strategic national asset, helping restore connectivity in times of distress when physical or cyber space is under attack.

Second, in the commercial domain, fixed infrastructure has traditionally been way more powerful than wireless data connectiv-ity. Underpinned by local fiber optic networks and international bandwidth, fixed-lines have the ability to provision and transport high volumes of data, video, and bandwidth at faster rates, which is essential for large users in commercial and defense sectors. Companies in the IT sector also need fixed-line connectivity because of the dependency created by high-quality and round-the-clock services for overseas business. In the retail (last-mile) market, fixed-lines enable operators to provide triple-play services – data, video and voice – to households and small businesses over the same line via IP networks.

Ground RealitiesLike most developing countries, Pakistan seems to be cruising on its way to become a wireless-only country, particularly in the last-mile domain. Agreed that fixed-line subscriptions have been declining worldwide, primarily due to the mobile-substitution effect and changes in lifestyle (landlines seem as quaint to Millennials as pagers seemed to Generation-Y folks). But Pakistan is

doing comparatively poor when compared to the developing country average (see the illustrations). Just half of the country’s installed capacity of 6 million PSTN lines is under subscription, even less is expected to be in active usage. Fixed broadband penetration (DSL, HFC, and FTTP) is even worse, with less than 1.5 million subscriptions as per latest data. A household analysis on latest o�cial data shows that landlines are being used in just 10 percent of the households while DSL penetration is in less than 5 percent of households. If we include in this numerical Pakistan’s two million+ micro, small, and medium enterprises and some 30,000 registered corporations – these are the commercial entities that are traditionally the heaviest fixed-line users worldwide along with the governments – fixed penetration further drowns.

So, for an infrastructure that powers a variety of connectivity needs of a modern economy, what has Pakistan been doing Well, Pakistan has so far built around 22,300 kilometer long fiber optic backhaul, as per o�cial data till March 2014. But experts maintain that is not enough – for both short-haul (last mile) and long-haul (intercity connectivity) – given the geography and population of the country. Most of that cable is concentrated in ten to fifteen metropolises, causing a glut situation where a handful of connectivity providers compete for the urban connectivity share. Too much fiber has been lying around in cities for some time now. This locked-up investment has ensured that there are not enough operators with adequate investment to take optic fiber to second- and third-tier cities and towns and rural areas – locations where it is the most needed.

Pakistan has done relatively better in international connectiv-ity. In the under-sea connectivity with the world, Pakistan already has operational submarine connectivity via SEA-ME-WE-IV, IMEWE9 and SEA-ME-WE-V. A new submarine cable linking Asia, Africa, and Europe (AAE1) will include Pakistan and is expected to be operational by 2016. Transworld Associates Ltd, a private venture, has previously connected Pakistan with UAE and Oman via TWA-1. In recent years, work has been underway on Pak-China fiber optic connectivity via land, and reportedly, more investment is coming into that project. But growing data demand in the future may put pressure on existing backbones.

Countryside CablesExperts note that the problem of inadequate fiber in the short-haul (last mile) can be surmounted through the rapid deployment of wireless technologies like WiMax, EvDO, and fiber-to-the-premises (FTTP). But to enable wireless technologies to take care of last-mile connectivity, Pakistan needs to invest in the backbone – fiber optic – in places where it is currently absent. Put simply, fiber optic infrastructure needs to be extended to the countryside – and fast! Wireless-only solutions are tempting, but they will digitally exclude much of the already-excluded population who will not have access to ubiquitous and affordable internet for a long time. The government needs to realize that a pervasive fiber optic infrastructure is essential to underwrite effective and widespread usage of ICT services and overall economic development of the country. But fiber optic is a costly and logistically-challenging investment. One of the oft-cited factors behind limited rural expansion of optic fiber infrastructure is that after the state’s market departure post-deregulation, the fixed infrastructure’s wholesale market is roaming without purpose. This market is not even an oligopoly anymore; only one large player, PTCL is left that has the financial wherewithal to fulfill the projects. The government needs to encourage private sector to roll out fiber towards rural areas. It could take measures like tax-breaks on corporate income and duty-exemptions on machinery imports. Perhaps the most-effective government intervention can happen in setting the “Right of Way” rules for laying down the fiber optic cables. If it becomes easier and timely for companies to obtain civic permits and if reasonable rates are charged per kilometer for laying down those cables, it can catalyze the fiberisation process in the country. At present telecom operators are at the mercy of local and provincial governments, with different sets of rules and rates, and influential landlords, with no rules, on the way.

No Way Around FiberPublic-private-partnership is the buzzword – but the telecom sector’s Universal Service Fund (USF), founded in 2006, already embodies that collaboration. However, slowdown in the fund’s performance in recent year and its compromised financial autonomy seem to have resulted in insignificant progress in laying down optical fiber to the Union Council level (which was originally planned). So far, just 5,068 kilometers of fiber has been laid through USF contracts from a subsidy of Rs6.4 billion. Surely there is a case that the government should effectively utilize the USF’s billion dollar kitty to promote fiberisation in the country’s rural areas. USF’s primary task is exactly to finance the stubbornly high capex for projects like provision of fiber optic to unserved and under-served areas. USF needs to take the lead here, for which the government needs to set it free. Process of USF contracts and subsidy award needs to be expedited, given the challenge that lies ahead. That is not to say that the private sector should sit idly by and wait for USF contracts. An added opportunity for any fixed-line infrastructure provider is that after burying those cables, they can go above and beyond the market of wholesale connectivity sales. As said earlier, the retail market is largely untapped. Want to be the first internet provider to millions in rural areas? Go, lay down the fiber there! Then, in the cities, the fiber-to-the-premises broadband is a lucrative opportunity for high-speed triple-play services to tens of thousands of savvy households. Already, a�uent neighborhoods in major cities like Lahore, Karachi and Islamabad seem hooked to such services. Institutional business, that is dependent on this fiber, also beckons. While concluding, let’s just be clear that while mobile broadband – 3G, 4G and LTE services – are all the rage these days, even they cannot run without e�cient backhaul/backbones provided by optic fiber cables. To use another analogy, in the last-mile, 3G/4G are the fast food when compared to the proper diet that is fixed-line infrastructure. Just as one cannot live on fast food forever, a country as populated and geographically-scattered like Pakistan will be unable to fully reap the benefits of ICTs in a largely wireless-only environment. So, better get in the line for fixed-line. There is no way around it!

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Fixing the fixed infrastructureT

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Fixed-line penetration (%) per 100 people41 39

26

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13 1311

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1.3 0.73

Data source: ITU (2014figures)

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19.1 19.2 18.8 18.5 18.4 17.8 17.2 16.7 16.2 15.8

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Declining fixed-line subscriptions (per 100 people)Developed Developing World

Data source: ITU

Fixed broadband penetration (%) per 100 people

Data source: ITU (2014figures)

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The writer is a Senior Analyst at BR Research. He can be reached at: hammadshah24@gmail.com

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I N T E R V I E W N E T S O LS A L I M G H A U R I

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“Pakistan’s voiceless IT industryneeds a dedicated ministry”Salim Ghauri is the CEO of NetSol Technologies Limited, largest Pakistan-based software firm. He served as Chairman of the Pakistan Software Houses Association (P@SHA), the leading IT industry forum, in 2014.

Research: How do you see the ICT landscape in Pakistan?Salim Ghauri: “ICT” comprises of “IT” and

“Communications (C)”. But in Pakistan, the “C” absorbs everything and IT goes into background. Yes, the “C” has big businesses and multibillion dollar investments. That’s why I feel telecommunications should have been a separate ministry. But IT should have a separate ministry, too. IT creates jobs, and lots of them, and earns the country money without expending any raw materials. IT invests very little and brings huge export revenues.About 95 percent of IT companies in Pakistan are export-oriented. We don’t need gas or power. NetSol and others have built this industry. But this industry is voiceless. We need to be heard by the policymakers.

BRR: What is the Pakistani IT industry’s export size?SG: I am really excited by the happenings in the IT industry. Small companies are generating reasonable revenues from overseas. The SBP figure of local IT exports is around $350 million – that’s totally wrong. I would say the overall export revenues are over $2 billion. The o�cial figure just represents the export proceeds reported by IT companies like NetSol. We declare every single penny and document it. About 90 percent of IT companies are small and they are not reporting their export revenues at all. This is not just the freelancers. Their export revenues comes as remittances, through a legal channel, of course, but not properly documented as such. There is a lot of IT freelancing work being done from Pakistan for overseas clients. I encourage that. And I am advocating that the industry should create a forum to bring the freelancers together and develop their capacity and promote them.

BRR: People keep referring to the Indian IT scene. Is the comparison fair to Pakistan?SG: It’s unfair. India’s market is about three decades old – Pakistan’s is hardly a decade old. India has a huge resource pool, which Pakistan cannot match. Then there has been political stability in India, an indicator where Pakistan is still lacking. Foreign customers are still shying away from Pakistan – we have

to go to great lengths to bring them here. But we are still hopeful as an industry. We have the products, the people and the processes to excel. I think we need political stability more than any other industry. We have to go to great lengths to attract foreign clients, who are affected by instability. Security situation is improving after the ongoing operation. But political stability is going to take some years to come, so we need to be patient.

BRR: What is the local IT usage situation like?SG: Now about 1800 IT companies are operating in Pakistan. But they are mostly exporting because local use of IT solutions is very low. Very few Pakistani companies get their work done by Pakistani companies. I must tell you not a single Pakistani bank has bought our NetSol financial software license. They don’t trust the local industry. Even if I offer them discount – which is very hard to offer given that we will be foregoing lots of dollars of exports when we deploy our precious human resources for local engagement – they are not interested, even though we will give them immediate support and services. A bank needs software to run its operations. And they will go to Dubai to get it and not come to Lahore or Karachi and get reliable service at home.

BRR: How has NetSol journey been so far?SG: Eighteen years ago, I was a very successful IT consultant in Australia when I decided to pack my bags and bring my family to Lahore and start my own business here. I did not see a single Pakistani IT company selling any software in Australia. I wanted to create a company that could create global demand and be recognized globally. From the outset, NetSol got its contracts overseas, starting from Thailand. We had an ideal break, but we also worked really hard to ensure that customer service was superior and we kept getting opportunities. We merged NetSol with a US company, formed by my brother, in the 1990s. We survived the dotcom bust, the mid-2000s tough times, and the 2008 financial crisis. We were able to get the critical CMMI quality certification, becoming the first Pakistani company to do that. By 2006, we had reached CMMI level-V, shared only by 150 other IT companies sin the world back then.

We then focused on our own software product – NetSol Financial Suite. We have now started developing next-generation product, called Ascent. Now it has been commercialized in the market since a year now. We will face a slow year or two before our new product takes ground. Now we are facing pressures on delivery – but with 1500 people in Lahore and about 100 people in Karachi, we will able to meet the growing demand. We are a global company now. We boast customers around the world. And now we are hiring people from around the world, including United Kingdom and Germany. You can say we are becoming a true multinational now. Our revenues last year were $40 million, the largest for any IT firm in Pakistan. We expect NetSol to be a $100 million company by 2017 – barring any crisis. That’s the first milestone. BRR: Tax exemption for IT exports (software and services) is expiring on June 30, 2016. How do you see that?SG: I have been advocating for extension of the tax break to the government for some time now. They should have done something on it by now – a new law needs to be passed. Lapse of the tax break will hurt export proceeds. Subsidiaries may not bring exports back home. The stature of the IT industry will further go down. But the government is not listening. They are serious only for telecom sector. The IT minister has so far not even met any IT industry stakeholders.

BRR: As a provider of IT products and services, how do you see the IT usage in public sector?SG: I think the Punjab government is ahead of the pack in IT usage, mostly due to the Chief Minister. Punjab is doing a lot of in-house IT development work. They have picked the right team for the purpose and very young people like Umar Saif are leading the way – they are bringing the change in Punjab for citizen services which will be visible in next five years. They don’t take our help, but we wish them well. But generally, governments have been lazy in Pakistan when it comes to usage. Government has not been able to provide the hype Pakistani IT industry could have created.

Interview by Ali Khizar and Sidra Farrukh

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I N T E R V I E W I N F O T E C HN A S E E R A K H T A R

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Cloud services: no dark cloud hovers over SME prospectsNaseer Akhtar is the founding President and CEO of InfoTech, a leading System Integrator headquartered in Lahore with 7 global o�ces. Naseer has over 28 years of experience in business management and technology. He previously served multinational organizations in senior positions within Pakistan, the Middle East, Africa and the US.

Research: How do you see things after 3G/4G rollout started in the country this year?Naseer Akhtar: Telecom operators have touched the peak of voice on wireless. We

have just entered into a new phase - “Information Revolution” - and there will be no saturation, no peak and no end to this journey. Contents and transactions will keep growing at an exponential rate. Our market and economy, like other economies, are ready. Carriers with the ability to invest in next-generation networks, engaging and innovating in the “Content and Commerce” space, will survive and sustain. Carriers are desperate to actually roll out as much value-added services as possible to get a better ROI. At the moment they are only focusing on mobile payments services. But there are a whole lot of applications on which operators can engage and prosper. For instance, pilots for B2B, B2C and G2C services are not being mainstreamed. There is a potential for M2M interactions, industrial and commercial applications, such as remote connectivity, POS or merchant machines, smart grids and smart metering etc.

BRR: Why is the ICT ecosystem not expanding beyond telcos and banks?NA: Firstly, there is very little growth in manufacturing sector in the first place. Secondly, big industries like textiles and smaller ones in SMEs have not reached maturity or sophistication for large-scale ICT use. Seths (loosely defined as the heads of family-owned businesses) would rather spend money on buying more machines than spending money on software that can optimize their supply-chain, production and distribution. They don’t see the connection: they think that just increasing the machines would increase the output. And that is somewhat right as well due to low cost of available human resource. However, there are a few players who are spending on IT and they are front-runners in technology spend – that’s why those business groups are ahead of others. Business pressures force people to spend on ICT. Manufacturing and trading sectors and SMEs in Pakistan are always under pressure, but they don’t focus on optimization for a viable business. We do have organisations like TDAP & SMEDA, but I don’t think they spend time, effort or money in proportion with the challenge. However, some growth is taking place in sectors like mobile commerce, there is an increase in business interactions (beyond chat), and so on. But there are impediments, which are topped by a regulatory environment that is not conducive. For instance, till date, the Cyber Crime bill is pending in the parliament. The same is the case with detailed legislations on electronic transactions and payment gateways. Even local players are reluctant to enter this market. Proper mechanisms for areas like dispute resolution have not been developed so far. In ICT, things are inter-related. Once you have a wide-ranging law on electronic transactions, the central bank and financial institutions can be savvier towards financial inclusion as well.

BRR: How does that environment affect your software business?NA: I will give you an example. Last year, one of our employees took away a software source code and joined one of our international multi-million-dollar customers. We went to the FIA, which collected evidence but couldn’t book him for the crime because there was no legal provision available. We lost that customer, an employee, and we can’t do anything beyond making the issue public to authorities overseas. This is the environment. However, I must point out that dealing with such issues is easy for big international principal companies, who can get the authorities here to enforce it. The impediment is mostly for local industry, which does not get any support.

BRR: How is the situation like in the local market?NA: The local market is very price-sensitive. We get paid a dollar locally for the same service or software which earns us ten dollars abroad. But that’s beside the point. We engage people locally and develop the market. Organisations like InfoTech can survive because our business is a decent mix of exports and domestic business. But the companies having purely domestic focus struggle for sustain-ability. For the money they are paid, they can’t produce quality services. The situation is abysmal.

BRR: What would be your solution for business optimization for Pakistan’s SMEs?NA: This is the era of cloud computing. The government bodies can sit down together and develop a cloud-based platform for business functions like accounting and supply-chain, and encourage the SMEs to make use of that. Cloud is a hosting service that is very economical. A small business does not need to have its own IT infrastructure and IT workforce, specialized hardware, costly software licenses, or backup systems. Just install a wireless router and get the internet connectivity, and start using business applications available on cloud now.

BRR: What is the situation on software exports?NA: Industry is growing organically, by about 15-20 percent per annum. Size of exports is just around $3 billion, which includes all the free-lancers and expats who are settled abroad but send in money from their software services back home. But that’s not su�cient – global IT services are worth around $3 trillion. Pakistan’s software exports are no more than $3-5 million per order or project. India created large-sized companies that are now employing tens of thousands of people. Even IBM and Accenture, global IT giants, have more than a hundred thousand employees in India. We need to have more companies which are larger in size, have capabilities that are focused on international business and can easily meet the needs of global enterprises. From here on, the industry needs government support through government-to-government channels. Global companies like Boeing, GE, Walmart, and JP Morgan would not engage to outsource their IT services to Pakistani software companies because of a) perception issue, b) lower internet bandwidth, and c) risk of doing business. The governments usually step in and give assurances to such big investors. They don’t need to provide guarantees, just the comfort.

BRR: Tax exemption for software exports is expiring in 2016. What are your thoughts on that?NA: If profits from software exports become taxable after 2016, what will happen is that the companies which have their front o�ces outside Pakistan will not bring all of their money earned from foreign clients to their head o�ces back here. Companies will locate wherever tax-e�cient environment is. I would recommend the government to review the law in time and keep the tax break, just as it is available to textiles and other export-oriented industries.

BRR: What else do you think the government can do to help?NA: Government initiatives play a major role in catalyzing software industry growth. Government can push for more IT use in the energy sector. We have been engaged in system integration projects for energy-sector Discos but the projects that have no government funding are at a standstill. Most Discos, such as Gepco and Fesco are running without any structured systems for key processes like billing, accounting, inventory and payroll. In this day and age, even a small corner store is using automation. Imagine how ine�cient it would be to run a 1.5 trillion rupee per annum worth of electricity distribution business without spending on systems and technology. There is no doubt that circular debt can be drastically reduced through very minimal investment in ICT. Some IT work has been taking place in the energy sector, but it is negligible compared to the challenge where annual power sector losses are roughly Rs300 billion Even if you exclude the impact of theft and line losses, the sector can still recover Rs100 billion. Pakistan must move towards technologies like the smart grid, which is now being used not just for billing but also load-management. The country needs smart meters for its commercial users to eliminate human interaction. Technology investors like us are willing to invest in this technology, provided there is a will for adoption of such systems.

BR ICT REVIEW

Interview by Ali Khizar and Sidra Farrukh

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I N T E R V I E W P S E BA S I M S H A H R Y A R H U S A I N

“Exports should reflect IT Industry’s talent”Asim Shahryar Husain is the Managing Director of the Pakistan Software Export Board. He has a BS in Engineering from Stanford University, California and an MBA from Duke University, North Carolina with 20 years of professional experience in software engineering, product management and technology marketing.

BR ICT REVIEW

BRResearch: What sells Pakistan’s IT export potential?Asim Shahryar: Quality work at significant cost savings! Potential exists in outsourc-ing work for options like software development, software testing, consulting centers, even

for overseas customers. During my trip with an IT delegation to United States in October, I had given a presentation to Oracle’s executives about the potential of Pakistan’s IT industry and investment options for them in Pakistan. Oracle is exploring different IT investment options in Pakistan and their director will be visiting Pakistan in near future. Microsoft has similar plans which it is exploring with its team in Pakistan. There are well over 124,000 IT professionals in Pakistan with expertise in delivering a diverse range of IT solutions including enterprise applications, custom software development, mobile applications and games, systems integration, call centers, and data center services. Overseas IT companies interested in developing new software, porting and testing their existing software, or updating current offerings can save between 60-70 percent on their annual development costs by establishing their own o�ces in Pakistan or by outsourcing IT work to Pakistani firms. It is pertinent to note that all major IT companies such as IBM, Oracle, Cisco, Microsoft, and Dell have o�ces in Pakistan. Pakistan has more than 50,000 professionals who are trained in tools and technologies of these IT vendors. Foreign companies can leverage this resource base to offer consulting and technical support services to their clients in South Asia, Middle East, and Africa. We have been using government channels to plan IT delegations to different countries. I had visited Silicon Valley with an IT delegation last month (October). We are planning another IT delegation with Pakistan’s Consul General in China in December. Then, OIC is planning a conference in Pakistan next year where we plan on setting up an IT pavilion to introduce local IT expertise to foreign governments.

BRR: What is PSEB working on to increase Pakistan’s IT exports?AS: Our mission is to multiply the exports of IT products and services from Pakistan and to attract FDI towards the local IT Industry. PSEB regularly interacts with the industry veterans to ascertain their current needs and suggestions. Based on the industry feedback, policies are devised and projects are launched in line with the objective to ensure sustainable growth of the local IT Industry. Every possible step is being undertaken by PSEB within its available resources to project Pakistan as a viable IT destination. This includes financial subsidies to IT companies for participa-tion in international exhibitions, establishment of new Software Technology Park (STPs), certifica-tion on international standards such as ISO and CMMi, IT internships, and IT trainings. In 2011, PSEB took the initiative to develop the first ever Portal of the IT companies in Pakistan. The portal is essentially a repository of the IT companies operating in Pakistan and hence a prospective local/international client can visit the website and browse through Pakistan-based companies, which could provide the required service. In addition, PSEB has plans to participate in different international IT exhibitions with IT companies and to organize IT delegations to different exports markets such as the Middle East, Central Asia, North Africa, Europe, and North America over the next two years. PSEB has set in motion several projects and programs which focus on improving perception of Pakistan as an attractive destination for IT outsourcing, with enhanced push towards soliciting business for Pakistan’s talented IT industry. It is pertinent to note that Pakistan’s IT industry is perhaps the only industry in Pakistan that has demonstrated consistent year-on-year growth over the past 10 years and is constantly ranked among the top destinations for ICT outsourcing. That is no doubt helped by generous incentives and programs intended to extend maximum facilitation to the IT industry, which include state of the art STPs, repatriation of profits, as well as full tax exemption on exports of IT services till 2016. As had been stated by Minister of IT in middle of November, Korea Exim Bank has agreed to do the feasibility study for a new STP on PSEB’s land in Islamabad. This park will enable IT companies to get new

o�ce space, utilities and connectivity at subsidized rates, which will help in generating new jobs and exports.Realising that youth comprises of well over 70 percent of our country’s population, PSEB is in the process of finalizing details for launching a technology incubator next year. The incubator project would provide both financial and technical assistance in addition to mentors from the industry. With PSEB’s technical and financial assistance, 23 companies have attained CMMi certification while 110 companies achieved ISO-9000 certification and 11 companies were certified to ISO-27001 standard over the past years. CMMi certifications, in particular, have more value for securing business from overseas clients.

BRR: What is the real value of IT exports at present?AS: We are working on two fronts to ascertain the actual size of our IT exports. According to State Bank of Pakistan’s (SBP), our IT exports were $370 million (Rs37 billion) in FY14. SBP has categorized IT exports under six categories, but sometimes banks don’t properly report IT exports to SBP; so some of the IT exports may not show on the radar. We have thus requested SBP to ensure that the IT exports are recorded under the correct categories by the banks. On the second front, we are in discussions with the IT industry to enhance the remittance of export revenue to Pakistan. In most of the cases, companies are transferring only the cost of their operations to Pakistan and keeping the remaining earnings abroad. However, we want IT companies to remit more of their foreign earnings to Pakistan to improve our exports and reserves. We are planning new incentives such as awards for top IT exporters and tax benefits to motivate these remittances to Pakistan.

BRR: But in June 2016, tax-exemption on IT exports will expire. Is PSEB working on a legislation to continue this tax break?AS: The government is fully focused on extending maximum facilitation to the IT Industry and would like to have the tax exemption extended beyond 2016. It is, however, reasonable to note that the government should be able to see some results in return for the incentives. This means that the industry needs to enhance export remittances to Pakistan. IT exports of $370 million are well below our real potential considering that even Sri Lanka had crossed $720 million in IT exports in 2013. Government will make a decision on extending the tax break beyond 2016 based on export levels by next year. MoIT offers substantial incentives to the ICT Industry at huge cost to the taxpayer. The incentives are closely monitored and regularly reviewed to ensure that maximum benefits accrue to the growth of the local ICT Industry.

BRR: Then what is your goal for software exports for the future?AS: Our goal is to cross $500 million in SBP-reported export figures by 2016 and to increase it to $1 billion by 2020. We want to become the second largest IT exporter in South Asia. The other goal is to motivate the industry to bring more of their export revenue to Pakistan. To achieve these goals, PSEB and industry will have to work closely. It has to be a public private partnership. It is pertinent to mention that PSEB board has representation from the industry. We interact regularly with the relevant stakeholders. We have worked together in the past and the results speak for themselves. In 2000, there were virtually no companies exceeding the $1 million mark whereas now there are more than 50 IT companies whose exports exceed that threshold. With consistent efforts of PSEB and the industry, Pakistan should be able to more than double its exports by 2020.

Interview by Sohaib Jamali and Hammad Haider

A R T I C L E N A S E E B N E T W O R K SM O N I S R A H M A N

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Pakistan is late to the party. E-commerce is booming throughout our immediate region. India’s leading e-commerce website, Flipkart, recently raised a record $1

billion in new investment, handling 5 million shipments each month. The website sees so much potential in mobile shopping that it has a stated goal of becoming “the mobile e-commerce company of the future”. To our north, China’s e-commerce leader, Alibaba, set a global record when it listed its shares on the New York Stock Exchange in September 2014. Alibaba’s IPO raised a staggering $25 billion, making it a record-breaking IPO, the biggest in the world. Today the Chinese e-commerce giant’s market capitalization is over $250 billion, exceeding that of Walmart, the world’s largest and oldest economy retailer. The market value of e-commerce companies in Pakistan’s immediate vicinity including Turkey, the Middle East, India and China exceeds half of a trillion dollars. But the party has finally started in Pakistan as well. By 2017, the size of our e-commerce market is expected to reach over $600 million from its current size of $30 million spent on online purchases annually. There are several factors driving this growth, which will dramatically change the way we buy things over the next several years.

Growth of Internet PenetrationPakistan’s internet penetration rate historically exceeded that of India’s until 2009. In 2009, India launched 3G and its internet penetration sky-rocketed. The same hockey-stick growth took place in Sri Lanka after its 3G launch earlier in 2006. With Pakistan’s long-awaited entry into the 3G club a few months ago, there will be a similar burst of internet accessibility which will further boost online purchases. Following the pattern of our neighbors, Pakistan’s internet-enabled population will increase from 30 million users today to 56 million in 2019. Over the next five years, 28 percent of the country’s citizens will have internet access. This unprecedented reach will transform not just how consumers purchase goods, but will also significantly impact several other industries. My own online jobs classifieds site, ROZEE.PK, today processes 40,000 job applications a day and has helped over 1 million people find jobs. Social media sites including Facebook and Twitter are transforming how we consume news and shape opinions.

Ubiquity of Access Along with the rise of internet accessibility through 3G, Pakistan is simultaneously witnessing a surge in smartphone usage. There are an estimated 9 million smartphone users in Pakistan, using handsets that are fully equipped with web browsers and online connectivity. Smartphones have become increasingly sophisticated, not only substituting many functions previously only capable through desktop and laptop computers, but also greatly increasing the ease of going online. Not only is the internet becoming more accessible to consumers, consumers are also becoming more accessible to internet merchants through the ubiquity of the smartphones in our pockets. While the growth of smartphones in Pakistan is linked to the rise of internet penetration, it is more so driven by a declining cost of increasingly sophisticated devices. Chinese companies, which have traditionally manufactured devices for the world’s leading mobile phone brands, including Apple and Samsung, are now OEM-ing their own handsets for a fraction of the cost that are powered by Google’s Android operating system. So significant is this trend that Samsung’s third quarter profits fell by 50 percent this year as its mobile business continued to lose ground to low-cost Chinese smartphone makers. The sub-Rs5000 price-point of relatively powerful smartphones in Pakistan is enabling online accessibility to penetrate lower untapped income strata of society. My cook now downloads recipes from the internet on his smartphone.

Mushrooming Online Payment InitiativesWhile over 95 percent of online purchases are fulfilled through Cash-on-Delivery (COD) in Pakistan, several promising initiatives

are underway which will make it easier to pay directly online. Many banks and telcos alike have launched branchless banking and m-commerce initiatives ranging from MCB Bank’s MCBLite, Telenor’s Easy Paisa, Mobilink’s Mobicash, Zong and Askari Bank’s TimePey, UBL’s Netbanking and others. The number of branchless banking agents, which facilitate o�ine payments for online purchases tripled from 41,000 in 2012 to 125,000 in 2013, making it increasingly easier and more convenient to transfer money. One of the most frequent complaints from Pakistan’s online sellers – of not being able to get merchant accounts that allow them to card payments online – has been redressed. While one international bank in Pakistan was once the only bank in the country to offer online merchant accounts, it was also extremely di�cult for businesses to get approved. When the bank wrapped up its consumer banking operations a few years ago, it left its approximately (paltry) 14 approved merchants high and dry without an online card processing facility. However, more recently a local bank has launched a product for businesses which is far more reasonable in its on-boarding criteria. Online merchants can now potentially collect payments electronically from 12 million debit cards in Pakistan. Perhaps the most successful online payment solution currently available in the country is Inter Bank Fund Transfer (IBFT). A large volume of payments are made by consumers directly going to their bank’s website to electronically transfer funds to online stores. Most banks are now offering their customers net banking IBFT payment facilities through their websites, bringing a majority of the country’s banked population into the fold of electronic payments.

Maturing LogisticsCurrently 95 percent of online purchases are paid for through COD at the time the parcel is delivered to customer. TCS, BlueEX, Leopards and others are providing COD delivery services across over 150 cities and towns in the country. This becomes especially relevant when considering that approximately 35 percent of the country’s monthly 70,000 COD shipments are delivered to cities outside the three main urban centers of Karachi, Lahore and Islamabad. While urban shoppers are more online as a percentage of population, the value for rural shoppers is higher as many products are not available in their local markets. This implies a huge untapped segment of the population.

Trust in Online StorefrontsOne of the main obstacles to the growth of e-commerce is the lack of consumer trust in purchasing from the “cloud”. As a dotcom entrepreneur in Silicon Valley during the 1990s, I recall the prevailing

conventional wisdom at the time: people would never give their credit card information on the internet to buy items. Today, over 72 percent of internet users in the US are digital shoppers. This contrasts sharply with less than 3 percent of Pakistani internet users who have bought goods online. Although we have a long way to go, there is correspondingly huge upside potential as well. After initial hesitation, an inflection point in consumer behavior was reached in the US during the late nineties with strong online storefront brands such as Amazon taking to mainstream media. The large amount of investment these sites were able to raise, coupled with highly professional teams, led to positive shopping experiences for the risk-averse early adopters who ventured to buy online. We will witness this same pattern in Pakistan. For the first time in the history of the country, we are seeing online brands deploying significant advertising budgets for mainstream media advertising. Deep-pocketed general classifieds sites like OLX, funded by the South African mega media group Naspers, and Asani, a Schibsted-funded company from Norway, have embarked in our online industry’s first media war with ads competing for our eyeballs. Rocket internet, which runs Daraz and Kaymu in Pakistan, recently completed an 8.2 billion dollars IPO in October 2014. Daraz and Kaymu are well-funded and will be pouring capital into the Pakistani e-commerce market in a magnitude not seen here before. Several other Pakistani online players will be launching their TV ads in the coming months, giving new credibility to the online medium and e-commerce. All of these developments will lead to a rapid increase in trust as first-time online shoppers experience e-commerce and generate acceptance through word-of-mouth. Big foreign investors are swooping in to become first-movers in key verticals in the world’s sixth most populous country with the goal of claiming online thrones. Visionary local players like Homeshop-ping, Shophive and Symbios are organically emerging from our ecosystem and bootstrapping to success. This is a winner-takes-all market: the largest marketplaces grow the fastest making it unviable for new entrants as the industry heats up. And this industry has a voracious appetite for capital. The e-commerce party has started.

E-Commerce: Pakistan is late to the partyW

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Monis Rahman is Chairman and CEO of Naseeb Networks and is one of Pakistan’s most prolific Iinternet entrepreneurs.

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A R T I C L E P L A N 9N A B E E L A . Q A D E E R

The phenomenon of tech-incubation in Pakistan

Nabeel A. Qadeer is the Joint Director, Entrepreneurship & Enterprise Development at the Punjab Information Technology Board

Entrepreneurship is a fancy word. Add technology as a prefix and the 'mystery cloud' thickens. As a career,

tech-entrepreneurship is still widely unacknowledged but the number of people indulging in the space is increasing. Though 'entrepreneurship' is not a taboo, it is not a preferred career option primarily because of limited understanding of what it means to be in the field. This attitude has been formed by a variety of social factors. In Pakistan, the number of internet subscribers has increased to 30 million and there were 15 million smartphone users in 2013. Going by these statistics, one can assume increased awareness among a larger segment of the population. However, those gaining information about tech entrepreneurship in specific are clearly not proportionate to the change in access to global data. With limited knowledge about the space globally, the existence of 'tech-entrepreneurship' is unheard of. Professions such as medicine and engineering are seen to be more respectable that add to a family’s social status. Since families are also more risk-averse, conventional professions also promise a stable revenue source for men who are expected to be domestic bread-winners. As a result, entrepreneurship is discouraged and therefore, remains unexplored. However, the times they are changing. Over the last 2-3 years, persistent IT-related efforts by organized institutions such as Pakistan Software Houses Association for IT & ITES (P@SHA), Punjab Informa-tion Technology Board (PITB) and Google have played a role in creating awareness about the widespread scope and potential impact of technology and tech entrepre-neurship in particular. These efforts have contributed to the confidence building process of the general public in tech-entrepreneurship locally. The foundations of Pakistan’s entrepreneurial scene have thus been laid. A strengthening culture of entrepreneurial challenge awards, many of which are local chapters of international efforts such as Startup Cup Pakistan, Startup Pirates and Startup Weekend acts as an engine ignition of entrepreneurial activity. These events are a platform where raw ideas are validated by the panel of judges and interaction with mentors allows refinement of the same; aspiring entrepreneurs receive confidence to pursue their dreams. The next natural step for an aspiring entrepreneur is incubation; the popularity of the concept is

fast-growing in Pakistan. To explain in simple words, a business incubator is an organization that facilitates growth of idea and early stage startups by providing shared work-space, corporate facilities such as legal and marketing advice and mentoring. It pretty much serves the same purpose as a glass incubator for new-born babies in hospitals; provides them with the right conditions and keeps them safe from the external world they aren’t yet ready for. One such project is Plan9, Pakistan’s largest technology incubator. A project of PITB, Plan9 has incubated 65+ startups over a span of two years, 34 of which have successfully completed incubation, with 18 more currently being incubated. About 200+ jobs have been created and over $2 million have been secured in investment by the Plan9 startups. Based at Arfa Software Technology Park in Lahore, it has a 6-month incubation cycle. Interestingly, Plan9 has neither a program fee nor it takes any equity for the services provided. I will be referring to Plan9 as a case to explain the developing ecosystem of tech-entrepreneurship in Pakistan. Till recent, a challenge faced by the local market that has experienced a prolonged infancy stage, is the validation and authentication of its products. A start-up cannot progress or enter the global market unless its market of origin has been validated. It is widely understood in the space that it is Silicon Valley that has the validating authority. Successful products, Eyedeus Labs, Appography, xGear and HomeTown Shoes, just some of the success stories coming out of Plan9, have now made a mark for themselves internationally. Therefore, they have played a significant role in getting the local entrepreneurial market check marked. Eyedeus Labs, Appography and xGear have attended Blackbox Connect, a two-week immersion program at Silicon Valley. Plan9 startups have been represented at global events such as Startup Asia, Startup Turkey, Global Entrepreneurship Week and GITEX. KickStoro, Eyedeus Labs, Technolsys, Bookme.pk and Appography have already raised seed funding. The experience gained and network created at these forums, besides benefiting the startups directly, adds value to the nascent ecosystem back home. Upon return, co-founders of these startups share learnings with the Plan9 network and also mentor them, when needed. In addition, the young and brilliant startup co-founders carry an image of the country that is way

different from what is portrayed in the media internationally. This opportunity has attracted top venture capitalists, angel-investors and mentors from Europe and the US to visit Pakistan and witness the magic being created by technology startups. Now, the factors that contribute to the success of an early-stage tech-startup can be placed in a broad category that includes team strength, commercial viability and technology innovation. The strength of the team primarily hinges on how well-rounded is the skill set of the team, the clarity it has about the goals of the startup and the collective drive to excel. By collective drive, it is expected that the team is willing to unlearn, is receptive to feedback and accepts its weaknesses with the intent to grow. A business idea may be pivoted for technical reasons or to meet the needs of the market; however, the team is a backbone of the startup on which the success is dependent. A product has to be commercially viable to succeed. The sub-indicators of this are the extent of need of the solution being provided and the market (its accessibility and receptiveness to change). There is little point in developing a tech-based product that is not addressing a problem or need of its potential users. The user will only be attracted to the product when it is seen a requirement or as something that can make their life better. These basic factors distinguish between startups and lead them in reaching a mid-stage that is charac-terized by customer acquisition, seeking investments and expanding the product market. Invest 2 Innovate (i2i) and PlanX are accelerators facilitating mid-stage startups in Pakistan. However, for the ecosystem to become concrete, it is important that micro-level steps are taken that have an impact on the macro-level; a measure that has a domino effect and contributes to entrepreneurship. The gap between academia and the tech industry needs to be converged so basic entrepreneurial skills are developed from a young age, the potential of technol-ogy in resolving real life problems is highlighted and students consider entrepreneurship as a career option that allows them to dream for the impossible. The validated model of Plan9 is being replicated in universities across Pakistan through its Network Partners Initiative. Early-stage startups will now emerge out of local universities. But what still needs to be done is inclusion of entrepreneurship in the course list offered to different programs.

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Invest2Innovate (i2i), a Washinton DC-based startup acceletator, recently released a groundbreaking report on Pakistan’s Entrepreneurship Ecosystem. The report divides the local entrepreneurial landsape into two areas; finance and support. These two areas are an integral part of the “life cycle of an [opportunity] entrepreneur,” which is shown in this infographic taken from the said report.

Pakistan Entrepreneurship Ecosystem

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I N T E R V I E W I N V E S T 2 I N N O V A T EK A L S O O M L A K H A N I

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Pakistani start-ups making promising startKalsoom Lakhani is the Founder & CEO at Invest2Innovate (i2i), a startup accelerator established in 2011. She has previously trained young entrepreneurs, changemakers and civil society leaders in Cambodia, Ireland, Ukraine and Kazakhstan.

Research: Please tell us about some of the i2i graduates that have become successful startups?Kalsoom Lakhani: We have graduated eleven companies so far – five in our first batch

and six in our second. Another five are in the middle of our current accelerator. Out of the 11, eight are still operational. Saba Gul’s company Popinjay is one of our graduates. Gul works with marginalised artisan women in rural Punjab to make high-quality handbags for a global market. She raised $0.25 million in capital from investors, all Pakistanis who were led by one of our angel investors, Yusuf Jan. She has now scaled her business considerably. Popinjay is now also present in a number of retail outlets and e-commerce platforms, including Anthropologie, a really well-known store in the US. Another company that has been doing really well is Eco Energy, which is providing solar energy solutions to off-grid communities mainly in Sindh province. They have also scaled their operations considerably and have distributed a lot of (lanterns and installed solar solutions). We have really cool companies in our current batch. They are not all high-tech but they’re doing great work in sectors like education and retail e-commerce.

BRR: Please explain the term "value chain of an entrepreneur", which is taken from i2i’s PEER study, in Pakistan’s context. KL: That means that there is a life cycle of an entrepreneur. First is the idea stage, where this process really starts. An idea is conceived, which we’ve seen when people attend hackathons or present at competitions. People then need mentorship and physical space to work on a given idea to turn it into something that can qualify as a prototype – that’s the incubation stage. Success here leads to the acceleration stage, where ideas are prepared for market and investment in start-up accelerators. The process can eventually result in M&A or exit or expansion in the growth phase. Understanding this value chain is important to understand the whole ecosystem and to enable players at various stages. It’s also vital to build partnerships at various stages – especially at the early stage, where ideas can die after competitions or events because of a lack of support at the next stage. There is also the need for linkages between early-stage start-ups and private equity players, who usually come at a later stage in Pakistan.

BRR: Services or manufacturing: which sector is better suited for Pakistan’s entrepreneurial landscape?KL: I think we have been a service-oriented economy for some time, especially in the technology sector where some application development activity is taking place. But there are local brands like Popinjay and Markhor (a Plan9 graduate) – which are doing manufacturing, design and retailing themselves – that are also setting the standards really high in non-technology sector, but are still retail e-commerce. Through companies like them we are now starting to see an increase in quality, which other startups can emulate. Markhor’s successful Kickstarter campaign shows that there is a huge global audience for the type of products they are producing.

BRR: Philanthropy is a huge social transfer in Pakistan in various forms. Can philanthropy capitalise social enterprises or promising business ventures?KL: That’s going to take time. There are big “family foundations” in Pakistan that can play a bigger role. Progressive organisations like the Aman Foundation are doing some really innovative work for social change. Then there is Mahvash and Jahnagir Siddiqui Foundation that is a big supporter of Acumen. Such families are changing the way of doing things, but it will take time as they will engage other family foundations.

BRR: For funding, what are the necessary conditions to attract formal venture capitals (VC) investors to Pakistan for investment in early-stage start-ups?KL: A pretty robust ecosystem exists in the US and there are lots of VC and private equity players and many exits have happened. The issue in Pakistan is that the risk is really high because of costly due diligence. There is lack of transparency in early-stage companies and adequate/objective third-party

industry data is hard to come by. The lack of information and transparency exacts costs which do not outweigh the benefits for the VC investors. Then there is lack of exits in Pakistan. Investors want to know whether there can be an exit down the road. Those issues will need to be resolved.

BRR: How much of an issue is law and order for these investors?KL: Perception is another issue with foreign investors. The Asia-Pacific ICT Alliance Awards were supposed to happen in November in Pakistan thanks to P@SHA’s incredible efforts, but recent security incidents, attacks on airports, and political instability meant the conference took place elsewhere. If foreigners are already afraid about going somewhere, setting up shop is more di�cult for them. In my view, the perception situation somewhat improved in 2013 following the first-ever democratic transition of power. But recent political and general instability are reversing that sentiment. However, I must point out that the law and order situation has inadvertently helped Pakistan build an indigenous ecosystem, with local players and stakeholders. When the domestic situation improves, foreign investors can actually invest here in the future.

BRR: What role can the government play in enabling entrepreneurship ecosystem?KL: The government has a huge role to play, right away. First and foremost is reforming the regulatory side, as Pakistan’s Doing Business rankings dropped down over previous year. I will give i2i’s example here: we are an LLC in the US and a Pvt. Limited Company in Pakistan. It took us a week to get registered in the US but it took us a year in finishing procedures in Pakistan. But as per i2i’s PEER study, there are very few things that the government actually needs to do to improve the ratings. There are complex procedures that can be easily cut down without any legal or administrative issues. Federal government’s youth loan scheme is a positive step. But because this scheme is purely financial in nature, it will not accelerate the enabling environment for entrepreneurs. To change the environment, they need to think in a much bigger way. The PML-N has been able to grow the ecosystem in Punjab – particularly Lahore – because there is political will to do so. However, at the federal level, there is unpredict-ability vis-à-vis staying in power. So while it is really easy to change the environment, political will is absent at the federal level due to survival issues, besides a lack of long-term vision.

BRR: How has the ecosystem progressed since i2i entered the market? KL: A lot of traction has taken place since 2011. There are macro-level challenges which will resolve in the long term. Despite that, I am confident Pakistan will soon be on the map of successful ecosystems in the world. Pakistan has had many incubators and now accelerators come up in recent years. In the ‘support’ area, it is doing great. We are seeing more co-working spaces come up in Karachi, Lahore and Islamabad, while Peshawar is also on the map now with Basecamp.

BRR: Growing sectors sometimes need a balance between competition and collaboration. Are local entrepreneurship support organisations sharing their experiences with each other?KL: Because of general lack of trust in the environment, I think Pakistan is naturally competitive rather than collaborative. I feel there are some players that are really collaborative compared to others. For instance, P@SHA and LUMS Center for Entrepreneurship are really open to collaboration. It is extremely important that in Pakistan’s evolving environment, more partnerships take place. My hope is that others will also become more collaborative. Where i2i comes from is a really collaborative place. We want to work with all the stakeholders out there to improve the quality. We as a community need to figure out ways to keep the bigger picture in mind and develop the ecosystem to enable more entrepreneurs to see more success stories come out of Pakistan. We all now need to keep a track of the start-ups and the quality of the programmes. Great things have happened so far in terms of quantity so now we need to focus on quality.

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Interview by Hammad Haider

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A R T I C L E S I D R A F A R R U K H

BR ICT REVIEW

ith no apparent respite, Pakistan’s power sector continues to be suffer from high transmission and

distribution losses, low recoveries by distribu-tion companies (Discos), and high cost of generation due to expensive fuel mix. All of that then gives rise to the circular debt. A part of the problem lies with an outdated and unreliable power grid infrastructure. A solution lies in smart grid technology. First, a quick detour to explain the smart grid! Smart grid is a broader terminology: it’s about using technology as a solution to enhance power generation, delivery and utilisation. Globally, electric utilities and technology companies are collaborating to position the electric power grid for the future. Power utility companies, with their technology partners, are deploying control systems, sensors, and smart meters to merge the existing power sector with information technology systems to form a resilient and digital grid. The key elements of a comprehensive smart grid infrastructure include real-time data sharing, load management, distributed energy interconnections, T&D loss control, meter automation, and dynamic pricing. What would a smart grid do? In such a system, the meters communicate with the control centre without any human intervention to identify how the load generated is being utilised and lost. Eventually, smart grid system can analyse real-time consumption data to

extrapolate the load patterns. Experts explain it through demand management where the load trails generation, and consumption is limited to the load available, hence curbing peak demand by managing periods of the same. Apart from advance metering and load management, digital meters give utilities the opportunity to provide more reliable energy service that cuts the amount of blackouts. Smart meters provide electronic reporting of the location of an outage and makes restoration faster. A pre-requisite for a successfully implemented smart grid system is automation at the meter level. Though some work is being done along the same lines in Pakistan, it is negligible compared to the opportunity in this domain. Apparently, Pakistan has IP-based automated meters at the Gencos-Discos level, which is enough for digitally measuring the electricity being drawn by the Discos from Gencos. Also, further down the distribution network, automated meters are now being installed at feeder level that can measure the power drawn by them from the grid stations. With data available about how much electricity is drawn at the feeder level, how much is consumed and billed, and how much is recovered, it is very easy to pin down losses and theft. The reason why steps are not being taken to address these power sector losses has to do with the lack of political will. The current government might seem keen in increasing the generation capacity of the

power sector, but what must not be forgotten is that it is the distribution level where the electric power enters the lines and the grid station is incurring technical losses in the range of 20 to 30 percent. Also, the current transmission network cannot take the load beyond 15000-20000MW, and thus needs massive investment. Once the Discos are automated and the transmission and distribution is up-to-date, Smart grid can also be used to optmise power generation, and thus combat the expensive fuel mix. This will also give an opportunity to the power sector to integrate the much needed renewable energy resources into the power grid. However, the power sector scenario of Pakistan or the entire South Asia is not similar to the developed countries where automation is at a completely different level. While the world is now moving towards real-time fully automated billing, weekly billing, prepaid billing, etc., Pakistan’s billing system is wreaked with inaccuracies and ine�ciencies. The caveat for moving into smart grid technology right now is the cost related to it, especially for a country that has sky-rocketing power sector dues. So, whatever work is being done in this regard is either through private sector investment or foreign funding. One sizeable and promising initiative is the one taken by K-Electric Limited in collaboration with InfoTech to implement smart grid technology platform in the company. The firm is piloting a capex smart grid initiative for its

distribution segment by upgrading its IT system, and is remotely managing smart meters at industrial and commercial customer level. Its Oracle Utilities Meter Data Management and Oracle Utilities Network Management System will likely help the firm in improving the monitoring of the entire power network which will result in improvement in recoveries and load-shedding management, reduction in losses and enhancement in operations. Smart grid is actually an unsung but an important part of building a more resilient power sector in the country. And the govern-ment should seriously look into upgrading the transmission network of the power sector and automate the distribution system along with enhancing the power generation capacity. While leapfrog into smart grid would be quite di�cult for a developing country like Pakistan, a gradual rolling out of pilot projects, and then developing and harboring meter and grid automation according to the demand by leveraging the work done elsewhere in the world would be the right approach. But mind you, all efforts eventually boil down to a display of political will and muscle, which are, unfortunately, lacking on many fronts right now. That needs to change, and soon!

Addressing power woes through ‘Smart Grid’

The writer works as Research Analyst at Business Recorder. She can be reached atsidra03@gmail.com

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February 2014, Pakistan made headlines across the world when Easypaisa was awarded the “Best

Mobile Money Service in the World” award at the GSMA Mobile World Congress in Barcelona, Spain. An honor for the country indeed, it was also recognition of the enormous speed with which Easypaisa had grown. But as one of the biggest cash-based economies in the world, the achievements of Mobile Financial Services (MFS) in Pakistan have only scratched the surface. There are still, many opportunities of further financial inclusion and digitization of the economy that need exploration.

2009: Dawn of A New EraThe launch of Easypaisa in October 2009 introduced Mobile Financial Services to Pakistan with the goal of making financial inclusion a reality for every single Pakistani. Out of an estimated 100 million adults in Pakistan, only 10-15 million had access to banking services. Most of the excluded people used informal channels like hundi and hawala for domestic and international money transfers; they saved cash under the mattresses for lack of a bank branch anywhere near their villages. Services like insurance and savings were a farfetched dream. Informal borrowing from established loan sharks resulted in exorbitant rates and eventually in cyclical poverty. Under such circumstances, Pakistan’s teledensity provides an amazing opportunity to capitalize on an already-existing strong base of cellular subscribers, and to convert more than

130 million active Sims in the country into bank accounts. While mobile accounts have yet to display an impressive uptake, over-the-counter (OTC) services have spread like wildfire across Pakistan. People have recognized the conveni-ence of walking into the local corner grocery store to send or receive money anywhere in the country in seconds, or pay utility bills safely, quickly and without ever having to stand in a line, which was the norm with the 11,000 total bank branches in the country. Providers like Easypaisa today have shops that are open till late at night and on weekends as well as bank holidays and serve millions of unique customers every month. OTC services as well as mobile accounts are now playing a significant role in bringing financial inclusion to the bottom-of-the- pyramid Pakistanis in the remotest areas of the country. In 2013, Easypaisa moved approximately 1 percent of Pakistan’s GDP which means more than $2 billion was included in the formal circulation that existed outside the documented economy so far. More people across Pakistan are now adapting to the innovative solutions offered by mobile financial services simply because they are convenient, affordable and easy to use..

The PromiseThe gap between the banked and unbanked provides rewarding opportunities for growth for MFS services. Many segments of society remain untapped to this day and their adoption of these services brings convenience, as Easypaisa has

demonstrated in the Government to Person (G2P) area. Despite the massive growth of transactions on Easypaisa and the entry of more players in the market, mobile financial services have only yet touched the tip of the iceberg in the country. Millions of Pakistanis still remain without formal financial services. There are still billions of rupees that flow as hard cash either from the Government-to-people (G2P) or from the people-to-Government (P2G). Disbursements of salaries and pensions and direct transfers of dividends to the beneficiaries through National Saving Certificates are a few instances where the collective goal of serving the customer and making lives easier for the masses can be achieved. Similarly, paying for a tra�c violation fine, passport issuance fees or annual vehicle taxes should not be confined to a particular branch or a particular bank after mobile financial services offer better, more time saving options. The man hours and energy wasted in paying simple, small payments can instead be used to boost productivity elsewhere. By digitizing the channel of transferring finances between government and people, Easypaisa can also serve in eliminating delays, ine�ciencies and corruption to a large extent.

The ConcernsHowever, all these opportunities have their challenges that hinder a greater uptake of mobile financial services. A lack of awareness of convenient services is one of them; most people understand financial services as OTC only and

have very little exposure to mobile accounts or the fact that a whole host of services can be availed on their own mobile phones, wherever they are, whenever they want. Those who do understand mobile accounts, often confuse them with the prepaid balance for GSM services, which boils down to another challenge – lack of trust. Lack of physical evidence regarding sending and/or receiving money sometime makes even the educated segment less prone to transfer cash through mobile financial services. A low literacy rate has also contributed to slower adoption of mobile financial services as well as mobile phones in general. Finally, some regulatory formalities are keeping mobile financial services operators from realizing their full potential. Strict KYC (Know Your Customer) and AML (Anti Money Laundering) policies coupled with amount limits on Money Transfer are hindering the market, keeping customers from the empower-ment that mobile financial services promise. Despite the challenges, the industry is moving in the right direction, though not as aggressively as it did in the last five years. The government and the regulator are both keen to make financial inclusion a reality in Pakistan and have always pushed the operators to increase the ecosystem for mobile financial services. To achieve the collective goal of making lives easier for the customers, it is important that the government open avenues for private banks as well as mobile financial services to offer similar services across the country.

The writer is the Head of Strategy at Easypaisa.

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MFS: opportunities and challenges

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ive years on since the launch of Easypaisa, the pioneering branchless banking provider, it seems that this

budding segment has only scratched the surface. That is not to say that the volumes have been low. In FY14, central bank data show that over one trillion rupees flowed through the mobile financial services (MFS) space with about eight full-fledged providers. Experts estimate that over 80 percent of Pakistan’s population does not have access to a bank account, leave alone more-sophisticated financial services. In a large unbanked market such as Pakistan’s, opportunities seem aplenty for MFS. However, so far, the business models of MFS providers are largely agent-centric and OTC-driven business, whereas the share of mobile-wallets remains tiny. Within the realm of branchless banking, the share of mobile-wallet stands at 14 percent in terms of volumes and 8 percent in terms of value of transactions, according to central bank data. With the gradual rollout of 3G and 4G network technologies across major cities and towns, MFS providers can possibly gain direct access to millions of mobile-wallet users in real-time through mobile broadband connectiv-ity and hence increase their market share. But there are a few hurdles that can get in the way and this article will shed some light on how to overcome them.

Widening The ScopeFinancial products have an eminent role to play in the management of savings of individuals and organisations. However, studies suggest that savings of households with financial institutions remains minuscule as Microsave – a financial service provider with international presence – estimates that only one-quarter of financial households have any form of savings

with formal banking institutions. That could be due to factors like limited financial literacy and low reach of financial products especially in rural areas. A confluence of above factors means that people tend to save informally; e.g. in jewelery, ‘committees’, real estate, etc. Offering mobile savings accounts at attractive rates can raise plenty of funds from general public that are currently outside of the formal channel. But as awareness level progresses, MFS providers on their end can offer attractive savings rates to attract that segment, but, in that case, the overall cultural shift needs to be brought about for more formal savings. The case for MFS is even stronger in remote, urban and rural areas where nonbank-ing financial institutions (NBFI) or even conventional commercial banks have not ventured out so far. Take for instance the case of agriculture that contributes nearly 21.04 percent of Pakistan’s GDP and accounts for 43.7 percent of the labour resource. Sadly, weather uncertainties, floods and safety of lands and crops are affecting the growth and productivity of agriculture sector. Here, credit and crop insurance have a crucial role to play. As distribution channels for farmers in rural areas are already confined, MFS seems ideally poised to bring these services to such areas. However, the optimism gets somewhat subdued given the daunting challenge of coming up with adaptable and user-friendly applications in multiple languages (local or regional speak), so as to surpass literacy barriers.

Making MFS ConvenientOne of the key barriers remains the inability to strictly adhere to Know Your Customer (KYC) requirements. On one hand, excessive paperwork slows the user registration process and exacts costs on the whole system. But on

the other hand, reducing documentation could fuel money-laundering risk. So, KYC must also find a balance. Lessons can be learnt from South Africa where regulatory authorities have granted green-light for acceptance of KYC documenta-tion in electronic form. As for electronic user identification, electronic forms can be dodgy sometimes due to scams and spams. Here, doubling the security mechanisms is essential. For example, in India, UIDAI’s Aadhar project makes use of finger-print and iris-recognition technologies for direct unique identification for 700 million users of financial services.

Cross-industry PartnershipsTo better serve the rural agri-market, MFS providers can take on a proactive role and become involved with the communities. For instance, in India, Bharti Airtel entered in a joint-venture with IFFCO (a fertilizer giant) and gradually reached out to over one million farmers. According to Airtel India sustainabil-ity report 2011-2012, the JV helped improve the farmers’ crop productivity and income levels through timely weather reports, market price updates, relevant government schemes, and other critical services. Investing in and maintaining technological infrastructure for MFS is expensive, which the providers then try to recoup through high service charges. There is criticism that transaction fees by the MFS providers are on the high side of affordability curve and thus need to be brought down. But it can be a hard balance to strike, given the need for higher adoption (affordability) and commercial objectives (profitability). But that problem can be addressed if NBFIs, like insurance companies and mutual funds aggressively enter into agency relationship with MFS providers and share costs

and resources. There is no reason why the Bancassurance model cannot be scaled via MFS in unserved areas. There is another reason for cross-sector collaborations: service diversification. The MFS providers’ focus is still on fund transfers, remittances, and utility bill payments. The government can be a big customer in the G2P payments domain. Already, federal government and a few provincial governments are using electronic channels for disbursement of pension schemes. But more can be done. The Benazir Income Support Programme (BISP) disburse-ments are another huge avenue. The providers can take a step forward and move towards building one-stop shops, where non-banking financial products including mutual funds, insurance policies, saving schemes and government securities can be offered, first in the urban areas and then expanding them outwards towards the hinterlands. Then, joining hands with merchants who have widely established distribution networks, including petrol stations, supermarkets, and retail shops can be used to increase the number of mobile wallets in the country. MFS itself is a product of convergence of two industries: telecom and banking. To keep on adding value to offering and expand the market, providers must seek and build collaboration with more industries.

The writer works as Research Analyst at Business Recorder. She can be reached atrabialalani@gmail.com

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Scaling up retail financial services

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Using smartphones topromote good governanceDr. Umar Saif is the Chairman of the Punjab Information Technology Board. He has extensive experience in academia, management, consulting and entrepreneurship in the IT sector.

Research: Where does Pakistan’s IT sector stand today?Umar Saif: The situation can be accurately summed up as a lost IT opportunity in Pakistan. The country’s entire software export is around two billion dollars, which isn’t a

lot, especially compared to India’s export of around a hundred billion dollars. Yes, India is indeed five times larger than Pakistan, but in this case India’s exports are fifty times more than ours. There are many elements that need to be looked at. One of them is that Pakistan did not produce enough IT manpower at a time when India’s Institutes of Technology and other second-tier universities were investing in IT as a sector. They produced IT professionals, who not only served in their local IT sector, but many of them left India and joined US-based IT companies. These people brought an IT boom to India that emerged from its BPO business. The big IT consulting names in India, like Tata Consulting Services and Wipro etc. have their own training facilities. Infosys trains around 70,000 people every year through a year-long training program. Pakistan has never come close to that scale. Compared to Indian firms, which employ around 350,000 people, the maximum number of permanent employees in Pakistani IT firms at a given point in time ranges between 250 and 350 people, and therefore Pakistan stands no chance of competing with even midscale companies elsewhere. And that is why the whole BPO business didn’t take off beyond a certain threshold in Pakistan.

BRR: What has been PITB’s role in promoting the IT sector?US: In the specific context of the freelancing business, which has surpassed $700 million in terms of revenue, PITB and Information Technology University (ITU) has brought in kids under one roof and supplied them with computers, internet, electricity and professional guidance. The result: ‘Plan9 TechHub’ which is a co-working space for freelancers in Pakistan. It is a platform where freelancers get an opportunity to learn, connect and grow while doing what they love – freelancing. Similarly, another one of PITB’s project is Plan9 – Pakistan’s largest technology incubator. Plan9 aims to facilitate technological entrepreneurship in the country with services such as free o�ce space, legal advising, marketing support and monthly stipends funded by the Government of Punjab. Just the dollar amount these freelancers have generated in the last six months has gone beyond $500,000. Plan9 has incubated 68 companies over the last year and a half, out of which 44 have successfully progressed forward. The model is now being replicated elsewhere across the country; other universities, for example, are setting up similar incubators, which is a positive sign for the industry. We have also started PlanX now, which is a technology accelerator for mid-stage start-ups. During a 6-month acceleration cycle, selected tech-startups are empowered by being provided access to multiple funding channels, a specialized network of mentors and global exposure. At the end of the cycle, they operate as high impact businesses. The next step that we would like to take – after providing accelerator facilities – would be to set up a venture capital fund.

BRR: How has PITB’s experience been in automating Punjab government?US: PITB is also heavily involved in attempts to automate the government. My energy is fully consumed in trying to monitor government’s work effectiveness and service delivery. Is the policeman, the health-worker, or the government school teacher attending to and completing his or her tasks?The government has historically been very poor at monitoring its own performance, and IT can play a huge role in that. We have developed around 26 Android-based data-collection applications to be used by employees and workers in various public departments. This is just the beginning; based on the geo-tagging and digitised identification and collection of data, we can also create prediction models. We are also working in collaboration with the World Bank to increase transparency and work towards better resource management and smart monitoring in key departments of the Government of Punjab, to improve its service-delivery. For this, we have initiated various processes of automation and evidence-based monitoring projects that are based on the predictive model and SMS alerts for the relevant department. We do this smart monitoring thtough our staff, based on the 30,000 Android-based smartphones given out by the Government of Punjab to workers in various depart-ments. Using smartphone applications, we are finally getting a handle on how productive field-workers and employees are, and whether they are passing on verifiable data.

BRR: Is there any programme on citizen engagement?US: In order to facilitate the public in interacting with various government departments and agencies, one of our flagship projects is the Citizen Facilitation and Service Centers. One of them, the Citizen Contact Centre is a multi-lingual, centralised call centre platform that aims to increase an ordinary citizen’s access to government structures via a directly-linked SMS service. The Citizen Feedback Model (CFM) is another one of our services that proactively solicits citizens’ feedback about their interaction with the government for 17 different services. Covering about 45,000 daily citizen interactions, CFM has managed to contact over 4.4 million citizens so far, and more than around 4,000 corrective actions have been taken based on this feedback.

BRR: What kind of monitoring steps have you taken in the education department?US: What I ultimately want to accomplish is that we are able to solve the issues to focus on the improvement of what is being taught at schools. In this regard, e-learn-Punjab has not only digitised all textbooks from grade 6-10, but also converted them into interactive textbooks along with thousands of videos, simulations, animation and self-assessment exercises. All of this material is easily available online at no cost.We are also investing in testing technology and student feedback as well by asking students and parents, questions about the school curriculum through SMS. Through this, we have accumulated over 450,000 contact numbers of parents to whom we send out our questionnaire To help compare and evaluate students, schools, and other teaching indicators across different districts. As for the physical presence of teachers, students and the infrastructure, the School Education Department’s Monitoring and Evaluation Agents (MEAs) have been regularly visiting and reporting on these indicators at all public schools through tablet-based digital forms, which include data-verification requirements. This has significantly reduced the number of ghost schools in the last three to four years.

BRR: What are the technological solutions to address the energy sector issues in the country?US: Right now, there are two levels of automated-metering in Pakistan. One is at the Common Distribution Points (CDP), which is the link between the Gencos and the Discos. The Gencos feed electricity to the national grid. These CDPs can now digitally measure how much electricity is being drawn by Discos from Gencos. The other level of automated-metering is further down the system, where USAID has invested in digitally measuring the power drawn by the 8,300 feeders from the grid stations through IP-based meters. Therefore, the power that Discos are drawing, and billing for at the neighborhood-level is automated. What is not yet automated is the power drawn at the individual level, which is expensive to have. But if there is no automated metering at the individual level, so be it. It can overcome a major shortfall by just comparing what is being drawn to what is being billed, and then targeting on decreasing the so-called 30-40 percent technical losses that are being incurred. Bill recovery can improve significantly at the neighborhood level with automated metering in place. Similarly, industries can also be monitored for bill recovery as they all have their own feeders too. Georgia is one good example of a major turnaround in the power sector; from a country with 5-6 hours of load-shedding daily, it now exports energy; just by employing automated meters at the feeder level. The country’s success did not rest on investment in power generation, which takes at least five to ten years; its transformation depended largely in controlling theft and making the distribution network better through automation.

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Interview by Ali Khizar and Sidra Farrukh

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Technology for democracyEmrys Schoemaker is the Director and co-founder of iMedia Associates, a UK-based firm that specialises in supporting communication for social change in countries including Pakistan, Nigeria, and Afghanistan. Emrys is also currently a PhD candidate and researcher at the London School of Economics, where he is investigating mobile internet in development sector.

Research: When PTA auctioned 3G licenses this April, it put minimum rollout obligations at 50 percent of Tehsil headquarters in six years. Do you agree that it is a small coverage threshold?

Emrys Schoemaker: I think the operators are going to have to expand quicker due to commercial issues. In that process there will be unserved areas, areas that have a low rate of return. That’s where the civil society and the media must find ways to push the government and operators to go for universal rollout. The other point is that six years is a long timeframe; there are legitimate questions to be asked to the degree that the government is acting as the defender of the public interest – why not 3 years, for example? It’s not unusual for governments to respond to private sector lobbying, whilst the public has the least means to make their case. But even more important is the need to think beyond this simple analysis of mobile presence or absence. Just because there are internet signals, or smartphone prices are falling doesn’t mean there will be a significant development dividend – either in terms of economic growth or in change in values and attitudes. How the service is used is what matters: what are the people reading and watching, for instance.

BRR: Agreed. How can we produce locally relevant content?ES: Your question echoes the debates that date back to the 1970s when satellite television took off and there were questions about controlling financial benefits and cultural influence of broadcast media. What resulted was a Western-dominated media business. We are having this question again. What meaning, what value, and what content is the online space holding and who gets to shape that? If there is an argument that there is a need to support values and attitudes in Pakistan that are appropriate for Pakistan and that can give the country a singular place in the world and protect its sense of identity and dignity, then there has to be content that is going to support all of that. Whether that question is important, and what the answer to it are, are ones that only Pakistan can and should decide.

BRR: Have any other countries embarked on the locally-relevant-content-production project?ES: There are actually very few examples of this; Brazil is one of them. But the issue is more basic in nature. It goes back to something I call ‘digital capabilities’ – capabilities to participate and produce content for the emerging digital space. People need the capabilities and basic critical thinking skills to be able to find content that is meaningful and be able to understand and investigate the content that they do have access to.

BRR: How does Pakistan fare on this content-culture equation?ES: Pakistan’s society offers a great counterfactual to the notion that when people are exposed to Western content and values, they become liberal and secular. The classic modernization argument is that when people begin to live in cities, buy Western goods, have nuclear family arrangements, perform knowledge-based jobs, and become part of post-rural, post-agrarian social setups, their values will also shift. But when you look at Pakistan, the highest level of social and religious conservatism is found among the urban middle class. This demographic, which the whole thesis of technological modernisation is based on, itself contradicts the argument that living Western lifestyles means adopting Western values. Classic modernisation theory argues that technology, and information technology in particular, disrupts the main sources of meaning that people draw on to define their lives: religion, tradition, and family. But Pakistan’s example shows that technology tends to amplify the already-existing values and attitudes. And if the dominant and stronger narratives are social conservatism, then those are the ones that will become stronger.

BRR: Should content-development be open-ended or there must be guidelines or a focal body for local content development?ES: In the UK there is one body that regulates telecom and media. This body – the O�ce of Communications or Ofcom – is the government regulator for both the broadcast and telecoms market as well as protecting the public against harmful and offensive material.

Of course, all content-producing organisations invariably have an agenda and values that shape the content these organisations produce. Broadcast media amplify the voice of the editors and owners. But in the digital space anyone can be an editor and content producer – and so, in principle, any citizen can use these technologies to amplify their voice. If the government and the society have a shared vision for what Pakistan should look like or if they have a set of desirable social outcomes, then there needs to be a stronger push and investment in strengthening the capabilities of organisations and people to articulate that vision and those values – otherwise the digital space will be dominated by other voices, and other values.

BRR: How do you see the situation where YouTube continues to be banned in Pakistan?ES: There is an argument that if there is no restriction on content, rationalism and tolerance will prevail. I think that is misplaced. I am not saying that the ban on YouTube shouldn’t be stopped – I think it should be accessible to everyone; what I am saying is that if everyone could access YouTube, it shouldn’t necessarily be expected to make Pakistan into a tolerant society. We know that when people have a lot of choice in content consumption the effect is to reinforce or amplify existing attitudes through the function of filter bubbles and echo chambers. In other words, people choose content and debate online that reflects what they already think. Research even shows that when people see ‘different’ ideas, these ideas are rejected and existing attitudes strengthened. And they also tend to select entertainment over ‘functional’ content such as education-related material. That’s why the argument that YouTube contributes to education is also misplaced. We know from research into online education platforms that the people who benefit from them are those already well-educated, often already in education. YouTube and Massive Open Online Courses are not a substitute for proper schools, colleges and universities.

BRR: Do you think growing internet penetration and social media usage can help in democratising Pakistan?ES: I don’t think technology will be a determinant of electoral outcomes in Pakistan unless and until people’s aspirations for the future of their country change. Existing institutions such as government, the military and religion have a big role in influencing public attitudes and values. It’s also worth acknowledging that one effect of the PTI’s political success has been to show how much people want change, and also to show that it is possible to shift from feudal vote banks and ideological politics to more interest-based or aspirational politics. Social media certainly played a role in amplifying that voice. But the shift hasn’t been brought about by tech-for-democracy. More interesting, I think, is how it allowed a space for new voices.

BRR: What would be your policy suggestions for telecom and media sectors in Pakistan?ES: I think the government and regulators need to work on ways to build digital capabilities of the population. Then policies for content development must be made – from subsidising ‘public interest’ content to strengthening the capabilities to produce content. It would be great to see the work of incubators like Plan 9 be extended towards much smaller towns across Pakistan. One problem is that, at present, the people who are doing civic technology for democracy are largely from the elite, so there is a need to include people from other income groups. Content should be such that it appeals to individuals in smaller urban towns, supports the development of critical thinking and gives people the confidence to participate in public life. I suppose my main point is to emphasise that we can’t solve problems in health, education and other social areas just by increasing ‘access’ to tech, however significant mobile phones and the internet are. We can’t inject modernity through mobile phones.

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Interview by Sohaib Jamali and Hammad Haider

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Addressing e-governanceRaúl Zambrano is the Global Lead and Policy Adviser in the ICT for Development and e-governance team at UNDP’s Democratic Governance practice based in New York. For the past 20 years, Mr. Zambrano has supported the deployment and use of ICT in nearly 100 developing countries. Following are excerpts from BR Research’s sitdown with Mr. Zambrano in Islamabad:

Research: You have previously worked in Pakistan. How was the e-governance situation like back then and how is it now?Raul Zambrano: It was in 1993 when the UNDP launched an initiative called the Sustain-

able Development Networking Programme (SDNP) that aimed at bringing access to development content via new technologies. Working without local o�ce here in Islamabad and using local expertise and human resources, we set up email nodes in four cities including Peshawar, Lahore, Karachi and Islamabad. We essentially provided email access to the internet and trained lots of people on how to effectively harness the new technologies to get the right content. After three to four years, a market developed and Pakistani entrepreneurs saw this as a business and set up shops. We then decided to pull out of the connectivity business and focus more on content and capacity. We did not speak about e-governance back then as we were just starting to create the building blocks for internet development in the country.

BR Research: And how is the situation now?RZ: The current e-governance situation in Pakistan can certainly be improved very quickly. According to the latest UNDESA e-government report, Pakistan ranks 150 out of almost 200 countries in the e-government index. That puts the country way down the list in spite of its enormous potential in terms of human capacity, expertise and resources. India, on the other hand, seems to be doing the right thing having launched a national e-governance programme over 10 years ago under the leadership of their Prime Minister. Now there are over 6,000 kiosks in India through which people are getting basic public services. The development impact of this initiative has been extraordinary.

BRR: What has been your e-governance experience in other developing countries?RZ: I have been in and out of many countries and I have found that e-governance needs at least two main things: local capacity and political will. India did e-governance, Brazil did it, and South Korea did it, too.My experience suggests that to have an effective e-governance strategy, a country does not necessarily need to have pervasive connectivity. India is a good example yet again as its connectivity is still relatively low but its e-governance is delivering for many poor and marginalized communities. Sometimes we confuse the “use of ICTs” with the “benefits of ICTs”. If somebody doesn’t want to or cannot use computers, they can still get access to basic services and information in mediated forms, based on use of ICTs. That’s not to say that connectivity is not important. Access to ICTs can help people discuss ideas about poverty, environment, the economy, etc. In a word, it allows people to also be active participants and have a voice in the public sphere. It can also help in development, which is about making lives better for the millions of people still sitting at the bottom of the socio-economic pyramid.

BRR: You mentioned Pakistan has many ingredients for e-governance to take off. But it hasn’t. What’s missing?RZ: All the ingredients seem to be ready here but what seem to be missing is one or more chefs that can cook an overarching strategy that brings all of this under one umbrella and synergize the various efforts. In almost every country, one can find champions in ministries, who are the persons actually doing lots of cool stuff with ICTs and are thus moving e-governance forward. Networking such champions is a good idea and a sound starting point. We also need civil servants and top managers in ministries that are brilliant, have a vision, and can amass some political will. In my experience, when e-governance solutions are deployed in ministries and succeed, they don’t get shut down. Why? Because they work and add public value! Having studied the cases of India, Brazil and Korea among others, it is clear than in addition to the bottom-up champions’ network approach; there is also need for support to e-governance by top decision-makers. In the above countries, it is clear that support from the Prime Minister or President was decisive to ensure that e-governance was indeed mainstream into the key line ministries. On the citizens’ side, it is possible to foresee a scenario where stakeholders can demand

e-governance for the improvement of basic public service delivery. If somehow that doesn’t happen, then citizens themselves can use their voting power to express their opinions. Citizens can ensure that e-governance is one of the pillars in the agendas of political campaigns and thus a priority for politicians too.

BRR: What could be the focal institution for e-governance in Pakistan?RZ: That is something that local decision-makers should decide based on the experiences of other countries. In South Korea, for example, it was the Ministry of Planning that took the lead and was able to bring all other key ministries into play. In India, it was the Ministry of IT that took the lead. At any rate, one thing that can be done relatively easy in Pakistan is to institutionalize the CIO (Chief Information/Innovation O�cers) position in ministries and then create a network with them where they can initially start discussing some of the issues they face. You will always find people who are smart, want to improve things and foster e�ciency and transparency in the public sector.

BRR: E-governance is about making public service delivery more efficient: high-quality, timely and low-cost. Do you agree that there is a link between e-governance and broader civil services reforms?RZ: That’s an excellent question and one that is usually missed by e-government practitioners. E-governance is about changing government using technology. Most developing countries actually run large public administration reform programmes, which more often than not are not at all connected to e-governance. I think it is up to e-governance practitioners to close this gap and ensure any public investment on ICT is linked to improving the public sector in general and public service delivery in particular. For open, transparent and accountable government, you need technology. Reforms are about changing the way a particular government works. E-governance encompasses that. That’s a hard paradigm shift to bring about, but one that is very important to do.

BRR: There is a lot of hype around open data. What does a country need to make effective use of open data initiatives?RZ: As it is now, the supply-side of open data is well ahead of the demand-side. Open data needs to ensure data and information both are being effectively used by the citizens; it also needs to be demand-driven. One could, for example, try to crowd-source which public sector data sets are the most relevant for stakeholders in a particular local context. Being that as it may, we also need to link open data efforts to right to information processes and legislation. India actually has a very nice example on the right to information and open data. In poor areas, info-mediaries have transcribed public data obtained via ICTs and placed the information on paper that is displayed on walls of the local communities, including in local languages. The data can tell local people that, for example, a public school was supposed to be built in a specific location with a given, approved budget; but now the budget is gone and the school is still not there. Based on that information; a bottom-up feedback kick-starts the engagement with local and regional government, not to mention the impact on transparency and accountability. In many countries, the call for increasing the supply of open data seems to exceed the actual demand for data. Most governments have lots of data – but they need to prioritise three or four which are the most important for citizen information and decision-making. There is also the issue that different regions have different development priorities, so a centralised open data policy might not work. Development happens at the local level, within the communities. Local-level open data is thus critically important.

BR ICT REVIEW

Interview by Sohaib Jamali and Hammad Haider

A R T I C L E I Q B A L M U S T A F A K H A N

Using technology for educationE

ducation plays a vital role in the socio-political and economic progress of a nation. Parents and governments in Pakistan have long faced daunting

challenges in provision of quality and affordable education. Some of the problems include limited budgetary allocations, low enrollment rate, high dropout rates, and di�culty in provision of infrastructural facilities to far-flung areas. In rural areas, good quality schools and colleges are scanty, ghost schools are aplenty, and faculty lacks the skills for proper instruction. But with technology, far-flung areas can be provided with modern educational infrastructure. The need of the hour is to find imaginative ways to apply technology to specific challenges across the education value-chain. One solution is to introduce digital textbooks in Pakistani schools. Institutes all around the world are moving towards providing their students with PCs and hand-held gadgets. This has helped them overcome the costly problem of updating their text-books time and again. The gadgets can be used by teachers for marking attendance, lecture delivery, and conducting quizzes. The students can benefit from them by accessing digital books and online learning material along with submitting their homework, quizzes and assignments. Such an ecosystem would also familiarise our students with the uses of technology for seeking knowledge, making them tech-savvy at an early age. Some students are also deprived of internet and technological devices at home. Therefore, if the schools can provide them with such facilities on campus, that can help bridge the digital divide from the outset. The latest advancements in electronic devices have made them quite affordable. Hence, institutions can devote the budget allocated to the textbooks’ up-gradation toward the provision of hand-held gadgets to their students. This also offers a way out from carrying heavy school-bags that act as a deterrent for school-going children. A research conducted by the US National Institute of Health in 2006 discovered that 37 percent of children aging 11-14 reported suffering from back-ache due to carrying a heavy bag. Additionally, this would also ease up the pressure on our forests as fewer trees would be cut to make paper for textbooks. But the challenge remains that most of the school teachers in Pakistan are not tech-savvy, let alone the students. Vigorous training sessions would be needed to train the faculty on the usage of such gadgets as only then they would be able to impart those skills in their students. Hence, it would be a matter of time before this idea can get popular in Pakistan. Another major hurdle, in this regard, is the power shortfall in our country, because online gadgets, despite being wireless, depend on some power to work. The good news is the advent of 3G and 4G, which offer a great opportunity for students in rural areas. As the latest mobile communication standards allow mobile phones, computers and other portable electronic devices to access the internet wirelessly, students will have more and more opportunities to go online and seek complementary education solutions, such as free online video tutorials. This presents a great opportunity for the introduction of e-learning and blended learning in Pakistan. E-learning is

the use of electronic media, information and communication technologies (ICT) in education. Whereas, blended learning is a formal education program in which a student learns at least in part through online delivery of content alongside textbooks. While still attending a “brick-and-mortar” school structure, face-to-face classroom methods are combined with computer-mediated activities. Such advancements in the field of education pose to clean-sweep conventional education methods. These concepts are gaining immense popularity worldwide and have made access to acquiring specialised knowledge a piece of cake. Vocational education training is another area where e-learning can also be made use of. These institutes all around the world are giving specialisation trainings to farmers to increase their crop yields via audio-visual lectures. Therefore, to enhance Pakistan’s global competitiveness in agriculture and textile sectors, it is pivotal that the farmers be provided with technical education and vocational training services using the same methods. Then, growing broadband connectivity can also boost self-learning. As per the 2010 Sloan Survey of Online Learning in US higher education, conducted by Babson Survey Research Group, enrollments in online courses increased by 21 percent during the year, whilst on campus enrollments increased by 2 percent. This meant an increase of over one million students in online courses. Over 5.6 million students were enrolled in at least one online course in 2010. These statistics suggest that e-learning is the future of education and leave no doubt about the potential of such initiatives taken at home. Our philanthropic organisation, Sabaq Foundation, has taken a step in that direction via its website www.sabaq.pk. The website is an online education portal through which students may gain access to free video tutorials at home. Sabaq website has so far covered O-level Math and Matric syllabus for three Science subjects i.e. Math, Physics, and Chemistry and is adding up other subjects. Due to pent-up demand for such portals, the website has over 2.6 million page views in less than two years and over 2 million video lectures have been delivered to 350,000 students. Had the same number of students opted for after-school tuitions costing around Rs2000 per month to each student (a conservative estimate), it would have cost their parents Rs700 million. Such blended learning platforms offer an alternative to seeking after-school tuitions as students can gain access to top-quality video tutorials right at their homes. Moreover, students who are facing di�culty understanding the concepts at school need not worry anymore. Girls who cannot go to tuition centres after school can greatly benefit from this platform. However, pilot projects for e-learning can only be successful in Pakistan once the students are well-acquainted with the use of technology. With the knowledge-based economies making waves on the road to economic progress, it has become extremely important for Pakistan to acquaint its students and teachers with the latest technological developments in the field of education. Only then can our country make a leap forward in terms of economic progress.

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Iqbal Mustafa Khan is the chairman and founder Of Sabaq Foundation based In Islamabad

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A R T I C L E Z U H A I R A B B A S I

BR ICT REVIEW

ad the general elections 2013 been held on the social media, Imran Khan and his party would certainly not be

protesting in Islamabad! Such is the social media clout that it can often lead to false hopes and misconceptions. Without an iota of doubt, the social media platforms are tipped to shape the future political spheres in the world, but ‘future’ is the word. Pakistan is one of the fastest growing social media-adapting countries in the Saarc region, according to social media observers and several studies. The number of Facebook users in Pakistan is growing exponentially, with over 13 million users recorded as of October 2014. Twitter users are estimated between one-quarter to one-third of Facebook users. This is, by no stretch of imagination, a small number; it is bigger than 130 countries in the world. But the social media impact in promoting businesses and changing political landscapes is still low compared to the developed world, with lesser number of active social media users. Observers relate it to infrastructure weaknesses and to some extent, low formal education level in Pakistan. Little wonder then the social media sphere in Pakistan, to a large degree, is confined to fan following and sharing pictures, with less meaningful debate or opinion-making resulting on popular social websites.

Demographic DividesThe demographic distribution is even more interesting. It is in ever-evolving phase, with more and more females coming to the sphere. Eighty five percent of social media users in Pakistan were male back in 2012, a number which has now come down to 72 percent, according to latest statistics by Pakistan Advertisers Society. “The involvement of female section of the society is a healthy trend that would continue to

grow as internet penetration continues to grow, especially after the advent of 3G/4G,” said a social media expert cautioning that more female participation does not necessarily mean more engagement, more eyeballs or more business. “Given that nearly 70 percent of the users fall in the 18 to 24 age bracket, companies are treading with care from the advertising perspective as the users are mostly not decision-makers when it comes to business engagement.” This, however, gives a glimpse of the future as what the experts call it ‘investing in future’ once the 20 something’s step into professional lives and are able to make decisions.

Managing Social MediaMore than using the social media platforms for business advertising and promotion purposes, many companies are using it for ‘response’ purposes. The saying goes that ‘you do not exist, if you are not on Facebook’ in the corporate world. For most firms, being active on social media is the means to avoid unwanted criticism and being responsive enough to dispel negative sentiments. “Customer feedback is critical in today’s world. Any query left answered has negative impact and negativity in social media spreads faster than you can imagine, and the loss at times can be irreparable,” said Social Media Manger of a leading restaurant. K-Electric is a prime example of suave social media engagement in Pakistan. The utility company used to be probably the most abused business entity, but their well thought out social media strategy built on a minimum 95 percent response rate while staying patient has worked wonders. KE now ranks as one of the better firms in terms of customer engagement, thanks to their social media engagement. “It is all about damage control, the hard work has paid off and we have earned goodwill through our Facebook and Twitter accounts,” said a KE o�cial.

The intense competition in the cellular industry of Pakistan ensures the top 5 spots in the ‘socially devoted Facebook brands’ are all occupied by cellular companies, according to socialbrakers.com, the Czech firm that maintains a global social media database. This should not come as a surprise, and the business pattern is pretty visible in how they are ranked and how they engage and respond on social media. The fastest growing network, Zong, is on top, and Warid, which has been losing subscrib-ers for some time, is at the bottom. Warid’s slide and Zong’s flight certainly do have other market dynamics attached but social media pattern cannot be ignored. That Warid answers 82 percent queries in 172 minutes per query versus Zong’s 100 percent response rate in 12 minutes per query, should be hint enough why consumers are making quick and smart choices in the highly competitive market. The cellular war on social media tells a lesson; you snooze, you lose. Customers come of age well and truly here and social media provide a key trigger.

Twitter: Where Less Is MoreOn the other end, there is Twitter, the real-time news portal. The number of Twitter users in Pakistan is an unknown quantum, but safe estimates suggest it must be close to 4 million. Twitter’s role in creating political awareness and political campaign cannot be over-emphasised, for Pakistan is one of the very few countries where five politicians and three political talk show hosts are amongst the top ten most followed people in Pakistan. Twitter usage is mostly confined to the more educated class, presumably those who follow news, mostly political news. For businesses to use Twitter as an advertising platform, Pakistan is perhaps not a ripe market yet, but there is still room for customer engagement in businesses having more

feedback value. Bear in mind the age bracket for Twitter is slightly higher than that of Facebook. Print media all around the globe is fast going digital. Most of the younger lot seemingly does not bother reading newspapers anymore, they prefer seeing headlines on Twitter and move on. A recently held seminar in Karachi revealed that almost 80 percent of the Twitterati in the age bracket of 20-30 does not read newspapers. “140 characters” is all what they are looking for, and print media need to be on their toes to fight for their place in the longer run. So what are the corporate guns – big and small – thinking? Social media are being tipped as the next big thing, the essential platform, the key to existence. But Pakistan’s advertising spend on social media pales in front of the hype. Roughly 4-5 percent of all media spending goes to social media, and that, too, is confined to some big names, mainly in the IT and telecom business. Some big corporates may not feel the need to advertise heavily through social media, such as FMCGs, as their need for customer interac-tion and response may seem minimal. This takes away a large chunk of the country’s ad spend away from social media. But the tide is changing. Companies are now having dedicated social media teams, bigger budgets. A living example is PTCL, which plans to increase its social media spending from 5 percent to 25 percent next year. Others may follow suit. So is Pakistan ready? Yes. Will there be a revolution soon? No. But the future is on social media.

Is Pakistan ready for social media?

The writer is Senior Analyst at BR Research. He can be reached at m.zuhair.abbasi@gmail.com

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A R T I C L E M U H A M M A D A L T A M A S H

Evolving consumer protection

The successful conclusion of the 3G auction spectrum in April 2014 caused a stir of anticipation in the country. Since then

consumers have been flocking to try these services. An industry expert, with access to daily tra�c data, said that "very substantial" growth in customer usage has taken place since the launch of commercial packages. A call centre manager at one of the telecom’s noted that questions about volumes of data used and browsing speed are amongst the most common faced by his team. And so one wonders how well consumers understand the new variety of data and speed options on offer under 3G and 4G services as network coverage continues to grow. One concern expressed by some sector observers is that complaints about 2G services [voice and data] still persist despite years of upgrades. While PTA's annual report mentions that these complaints are a small percentage of overall user numbers, certain issues remain. A spokesperson for the PTA said that complaints by consumers about voice quality, automatic subscription to services and unexpected reduction of prepaid balances are most persistent among users. He added that existing consumer protection mechanisms, which enable the consumer to complain to the regulator if their complaint is not dealt with in three days, will continue to stay in place. The PTA mentioned that since high-speed data services are new, there had not been a significant amount of complaints, just about 15, received by October 2014. These mostly related to customer being confused about the features of new data packages and also overcharging concerns. The source at the regulator mentioned that the PTA is in the process of evolving the consumer protection regime for high-speed data service. While the regulator is confident that issues will be ironed out gradually, it also hopes to publish a bulletin comparing 3G and 4G services to facilitate comparison by customers. Away from the standard complaint mechanism, telecom operators would also do well to take heed of Competition Commission of Pakistan (CCP) guidelines on marketing claims.The commercial launch of 3G services has seen telecom providers make a number of promises about service speeds in order to get ahead of competitors. From ads showing Lamborghinis to rockets and even speedometers, great creativity has been used to highlight the download speed improvements 3G can bring. But does this material meet the consumer protection guidelines the CCP has issued? And are the marketing claims made on telecom operator websites reasonable?Industry experts with access to daily data about the speeds being achieved by operators maintain that a constant speed for 3G services cannot be promised. This is because data rates vary on the basis of network tra�c and how good coverage is in certain areas. To their credit, all four companies currently offering high-speed data services have clearly highlighted the costs and terms of packages on their websites. Furthermore, barriers in the way of achieving maximum speed have also been published in comprehensive FAQ sections. However, the promotional language on some websites does not meet the CCP’s recommendations (for more, visit: http://www.cc.gov.pk/images/Downloads/guidlines/draft_telecom_guidelines_sep_10_2014.pdf, Pg 7).

One concern for the commission is unsubstantiated claims or "puffery". Guidelines encourage operators to publish claims that can be backed up with data. More importantly, operators have been asked to highlight typical speed ranges that can guide user expectations. Research has highlighted some problematic areas in this regard. On its website, one operator promises "lightning" fast speeds without disclosing a speed range. In addition, statements that its systems can rival the "speed of light" and achieve "supersonic" levels are clearly exaggerated.However, there is a more pressing concern here: unlike other operators that only place limits on volume, the said company's prepaid 3G packages also restrict speed to a maximum of 3Mbps, which goes against its language above. To its credit, the operator discloses that the PTA’s 3G Information Memorandum obligates telecom operators to provide speeds of at least 256Kbps to 3G users. While that is true, there is a major gap between its marketing language and the minimum speed it stipulates. As such it is hard to see the point of keeping such low expectations since consumers have been able to access multiples of this speed for years on wireless broadband. A spokesperson for one of the 3G operators confirmed that speed and download limits were in place on prepaid packages as it gives consumers the option to pay for the speed they require. He added that consumers with 4G handsets would be able to access much higher speeds and that a new offer (which was not available on its website at the time of writing this) would enable speeds of upto 5Mbps to prepaid 3G users. He claimed that his firm was not the only operator to put in place speed caps. There are more issues. An industry expert mentioned that pre-launch tests on an operator’s 4G systems indicated that speeds of upto 80Mbps were being achieved. However, the said operator’s print ads indicate that top speeds of 150Mbps are being experienced. A technical expert said that that figure is a theoretical speed. The CCP guidelines recommend that the "upto" speed claims should be backed up by data that show that level has been achieved by 50 percent of users. Furthermore, the commission calls for speed range data to be given equal prominence to maximum rates for both Super 3G and 4G LTE. The famous speedometer ads do not provide that. While the 4G operator’s website mentions a speed range, it says its Super 3G offering will be twice the speed of normal 3G at upto 42Mbps. It’s unclear where the maximum figure for 'normal' 3G comes from and even then non-binding guidelines require the operator to also show a typical range achieved by real users to avoid confusion. However, the operator deserves praise for introducing a system that reduces download speeds to 2G levels once the data limit is reached. This can certainly prevent customers from being overcharged. No names are being called out here, but there is an operator who should be praised for taking pains to include qualifiers alongside speed claims that mention how long standardised files will take to download.At present, publicity information is focussed on maximum speeds, which cannot always be realised. Even though guidelines mentioned above are not statutory, it would be wise of marketing teams to disclose ranges and to also mention the Contention Ratio (a figure that highlights the capacity of the network) in order to keep customers fully informed of the terms of packages and to prevent user dissatisfaction.

30BR ICT REVIEW

The writer carries out research on emerging industries. He currently runs an industry research service, NewsInBrief. He can be contacted on m_altamash4@hotmail.com

A R T I C L E S O H A I B J A M A L I

31BR TELECOM REVIEW

hen it comes to “tech for democracy”, there is almost a ubiquitous hype out there. The subject has become popular enough to make it a favorite among tech entrepreneurs,

policy wonks, moms and pops to even old-school political philosophers. And for good reason, too, for a profound transformation is underway on how we understand and use technology in our social, economic and political lives – at home and abroad. For instance, in Pakistan’s Punjab, the Citizen Feedback Model is using SMSs and phone calls to obtain feedback from citizens who received certain public services in the province such as pensions, health care, and property registration. Complaints, trends and flashpoints spotted using a hi-tech IT-dashboard are forwarded to administrative heads, and later escalated to the Punjab chief minister himself. Elsewhere in the world are exciting examples, too. For instance, teenagers in Rio de Janeiro have attached cameras to their kites to gather aerial images of their neighborhoods to help fix drainage systems, according to a recent UN-funded study called 'A World that counts’. Similarly, in Indonesia, the Ministry of National Development Planning is using public tweets about food prices to generate a near real-time food price index. Then there are open data initiatives – such as the Pakistan’s National Education Atlas, Alif Ailaan’s district rankings on education, or UNDP Pakistan’s district-wise MDG dashboard at home, and World Bank’s data visualization tools abroad. Initiatives like these do not only have tremendous benefits for improving governance by flashing low-performing areas to civil society and media, but also have enormous benefits for businesses, too. In the latter context, data stimulate innovation, develop new products and services, identify new markets, reduce barriers to entry into markets and address information asymmetries. In the former context, it holds public service providers to account by promoting democratic engagement and fostering greater transparency and better policymaking. The economic value of open data is huge. For example, the economic value of the data released by UK’s public sector is estimated to be £5 billion per year. This includes time savings worth between £15-58 million from the use of real-time transport data. Globally, the value of better and more open data is estimated around $3 trillion per year, according to McKinsey Global Institute, where sources of value from open data include new or increased revenue, savings, and economic surpluses.

Missing Meta Analysis These are all exciting examples with so much hope and so much promise. But the fact is that despite all the hype of tech for

democracy, most of the technological uses are confined to open data or improvements in day-to-day governance or public service delivery. There is very little that we know about the usage and impact of technology on democracy as a whole. And this is why a lot of unpacking needs to be done -- because when we talk about democracy, we are talking so many things in one word. At the one end, a well-functioning democracy has transparent electoral systems, and an e�cient and effective parliament. At the other end, a good democracy also means that we have a government that listens, and allows freedom of press and access to information, besides so many other aspects such as independence of institutions, respect for rule of law and human rights, civic education, etc. In that vein, one cannot help but notice the total lack of a comprehensive study that sheds light on the extent of usefulness of technology in various facets of democracy. So, for instance, there is a need to evaluate the sequencing and timing of bringing in technology in various aspects of the state-society relationship. Similarly, we need to work on building strong institutions that can prevent the abuse of technology and all the information that it controls. For developing economies like Pakistan, which struggle with weak institutions, this would be a major challenge. The tech-for-democracy-walas also need to assess what kind of technological uses work best in different societies. Presently, the whole movement seems to be on auto mode, which is alright because that is how things evolve. However, if we really want to benefit from the movement then we need to start classifying and synthesising the list of tech for democracy experiments out there and see what works and what does not work in different societies.

Local Government; Local Media On that note, one feature that might plausibly be common across the successful experiments in tech for democracy is the presence of local government and an active local media. This is especially important when it comes to making the best use of open data, and ensuring good public service delivery, because the supply of information isn’t going to create its own demand. To this end, three points come to mind. First, as Telenor Pakistan’s CEO Michael Foley said at a recently-held UNDP conference in Islamabad, unless technology and the data it carries don’t penetrate deep into masses in a manner that they understand, then “we’re only talking amongst ourselves". Second, as mentioned earlier, there is a need to roll out local government to ensure active citizenry, and to use technology as a bridge between provincial governments and those residing in those respective provinces. In a devolved Pakistan, the fate of

millions is tied with provincial and local governments. Experiments like those in Rio cannot be expected to be successful unless there is a responsive local government. Third, the country needs a vibrant local-level and regional media, to mediate and to consume all that information both in terms of state-society relationship and to improve markets. Local-level media, especially local FM radio channels, are also important for increasing awareness of programmes like the Punjab government’s Citizen Feedback Model.

Two CaveatsBefore we conclude this section of ICT’s usefulness in democracy, two important caveats highlighted in late 1990s by Benjamin Barber, an American political theorist, are worth sharing. The first one pertains to the speed mismatch. Whereas technology is inherently fast, democratic processes, be they representative or deliberative, are inherently slow. In a country like Pakistan, where democracy is yet to strengthen its roots, and where democratic values such as tolerance and acceptance are yet to gain grounds, the technolonisation of democracy is only going to make things more volatile and noisier. So better be prepared for that. Second is the mirror theory, which revolves around the notion that technology is as good as its people. Barber argues that while the technology of gunpowder helped democratise the West by chipping away the importance of horse-backed aristocracy, in China, it only strengthened the control of mandarins and tyrants. Likewise, while internal combustion engine and electricity led to a growth in private transport culture and suburbanisation in the US; in Europe, the same technologies paved way for public transportation system (railways) and the strengthening of urban culture. Today’s technologies can be expected to have similar fate. The practices of internet trolling by certain political parties, the usage of technology by local and international militants, such as the ISIS, all point in the same direction. Much, therefore, depends on improvements in the political and social landscape of the country since technology alone cannot be expected to foster democracy. And this is why, perhaps, the best way that technology can really improve democracy is by spreading civic education and democratic values across the country.

Tech is no panacea for democracyW

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The writer is Research Editor at BR Research. He can be reached at srjamali@gmail.com