Govt Explores Solutions to Curb Economic Losses from Internet Shutdowns

Pakistan’s IT sector is a significant contributor to the country’s economic growth. However, its progress is under threat from frequent internet disruptions and policy ambiguity. To mitigate the impact, the government is considering exempting Special Technology Zones (STZs) and incubation centers from future internet shutdowns. The Ministry of Information Technology and Telecommunication is drafting a policy proposal to ensure uninterrupted data services for these key hubs, which will then be forwarded to federal cabinet approval.

Economic Setbacks from Internet Disruptions

The IT and IT-enabled Services (ITeS) industry contributed around $3.2 billion in exports in the last fiscal year. It has been a consistent driver of growth with a Compound Annual Growth Rate (CAGR) of 22.6%. It employs over 600,000 skilled professionals, supports 2.37 million freelancers, and sustains nearly 3 million households. With stable policies and infrastructure, projections suggest the sector’s export revenue could reach $15 billion by 2030, which is staggering.

However, frequent internet outages have jeopardized this potential. Restrictions on Virtual Private Networks (VPNs) and lack of clear policies have already caused substantial damage to the IT sector. According to estimates, short-term losses from these restrictions are around $420 million, with long-term damages surpassing $1 billion. These figures include $320 million in direct revenue loss from reduced export efficiency, $20 million in compliance costs, and $126 million from a 30% drop in freelancer productivity.

Moreover, daily economic losses from internet outages are estimated at Rs1.3 billion, with some reports citing losses of $1 million per hour.

The Broader Impact

Unreliable internet and policy uncertainty are eroding investor confidence, critical for sustaining the IT sector’s growth. Reliable internet connectivity is undoubtedly the backbone of IT and ITeS operations. Pakistan’s Internet Freedom score, reported at 27 out of 100 by Freedom House, significantly lags behind regional competitors like India (50) and the Philippines (61).

Frequent disruptions have led to a 30% decline in order bookings, diminishing Pakistan’s standing as a competitive global IT hub. Past disruptions have already caused substantial losses, eroding trust and investor interest.

The Way Forward

The proposed exemption for STZs and incubation centers is a positive step. However, this measure alone cannot address the broader challenges. A comprehensive, reliable internet policy is essential for restoring investor confidence and unlocking the IT sector’s potential.

The IT sector can transform Pakistan’s economy, but this potential can only be realized with consistent support and stable infrastructure. The cost of inaction could lead to irreparable damage, not only to the industry but also to the country’s global reputation. Therefore, decisive reforms are needed to sustain this vital sector, ensuring Pakistan remains a competitive player in the global IT landscape.

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