Digital Crisis: Impact of Internet Disruptions on Pakistan’s IT & Telecom Growth

Are we serious towards growth in IT exports where Telecom sector alone to face Rs. 12 Billion loss annually due to internet disruption?
The growth of Pakistan’s Information Technology (IT) and telecom industry is a remarkable story of resilience and innovation. From its modest beginnings in the late 1980s, the sector has evolved into a cornerstone of the nation’s economy, driving significant economic growth, fostering job creation, and facilitating the modernization of various industries. However, recent disruptions in internet connectivity threaten to derail this progress, potentially inflicting substantial financial losses on the telecom sector and beyond.

A Historical Overview of Pakistan's IT and Telecom Sector

The roots of Pakistan’s telecom industry can be traced back to the early 1990s when the government initiated reforms aimed at deregulating the telecom sector. This led to the entry of private players and the eventual liberalization of the market. The introduction of mobile telephony in the mid-1990s was a game-changer, democratizing access to communication and laying the groundwork for the digital revolution that followed.
The early 2000s saw the proliferation of mobile networks, with companies like Mobilink (now Jazz), Telenor, Ufone, and Zong expanding their services across the country. This period also marked the advent of broadband internet, which, despite a slow start, eventually gained momentum as infrastructure improved and demand for digital services grew.
By the mid-2010s, Pakistan’s IT and telecom sector had become a significant contributor to the economy. The IT/ITeS (Information Technology Enabled Services) sector, in particular, experienced rapid growth, contributing approximately 1% to the national GDP, equivalent to around $3.5 billion. This growth was fueled by the rise of the internet economy, the expansion of mobile broadband, and the increasing adoption of digital services across various sectors.
Over the past four years, the sector has doubled in size, with projections indicating that it could reach $7 billion within the next two to four years. This optimistic outlook, however, is now clouded by recent disruptions in internet services, which are causing widespread concern among industry stakeholders.

The Current Crisis: Internet Disruptions and Their Impact in Recent Months

Pakistan has experienced a significant slowdown in internet speed nationwide. This disruption has had far reaching consequences, affecting not only the IT and telecom sectors but also commerce, education, healthcare, banking, and public services. The reduction in internet traffic - approximately 6,400 terabytes daily - has already started to erode the financial stability of telecom operators, who now face potential annual losses of Rs. 12 billion.
The financial strain on the telecom sector is particularly concerning given its critical role in supporting other industries. The telecom infrastructure is the backbone of the country’s digital ecosystem, enabling everything from e-commerce and online banking to telemedicine and e-learning. Any disruption in this infrastructure reverberates across the economy, exacerbating the challenges faced by businesses, consumers, and the public sector.

Impact on Freelancers and the Broader Economy

Pakistan is home to one of the world’s largest freelancer communities, ranking fourth globally. This community has been a driving force behind the country’s IT export growth, contributing significantly to foreign exchange earnings. However, the internet slowdown has severely impacted freelancers, many of whom rely on consistent and high-speed connectivity to meet international client deadlines.
Major platforms like Fiverr have even changed the status of Pakistani freelancers to offline, jeopardizing ongoing projects and future work opportunities.
The broader economic implications of the internet slowdown are also troubling. According to a study by Deloitte, even in a small country with a population of 40 million and moderate broadband penetration, internet disruptions can cause economic losses of up to $3 million per day. Given Pakistan’s much larger population and the centrality of digital services to its economy, the impact here is likely to be far more severe.

The IT Industry at Risk

The aspirations for Pakistan’s IT sector are high, with goals to increase IT exports to $25 billion in the coming years. However, achieving this target requires a stable and reliable internet infrastructure. The current slowdown not only threatens these long-term ambitions but also poses immediate risks to existing IT exports, which are crucial for maintaining economic momentum.

Effects on Blue-Collar Workers and Foreign Investment

Beyond the tech-savvy urban centers, the internet slowdown is affecting the livelihoods of blue-collar workers who depend on digital platforms to connect with customers. Plumbers, electricians, and other skilled laborers are finding it increasingly difficult to secure work, as their ability to communicate with clients has been severely hampered.
Moreover, the disruption in internet services could deter foreign direct investment (FDI), which is essential for Pakistan’s economic development. In today’s globalized economy, a robust digital infrastructure is a key determinant of a country’s attractiveness to foreign investors. The current situation may cause investors to reconsider their plans, leading to missed opportunities for economic growth.

Urgent Need for Government Intervention

Given the severity of the situation, it is imperative that the government takes immediate action to address the technical issues causing the internet slowdown. The Telecom Operators Association has already appealed to the Government to intervene, emphasizing the need for a swift resolution to prevent further economic damage.
The telecom sector, as a key enabler of Pakistan’s digital economy, cannot afford to bear the brunt of these disruptions. The government must prioritize restoring internet services to ensure the continued growth of the IT sector, protect jobs, and safeguard the broader economy from the cascading effects of this crisis.
In conclusion, the ongoing internet disruptions pose a significant threat to Pakistan’s telecom sector, with potential losses of Rs. 12 billion annually. However, the impact is not confined to telecom alone; it extends to freelancers, businesses, blue-collar workers, and the national economy as a whole. To mitigate these risks and secure the country’s digital future, immediate and decisive action is required