What is Keeping Digital Pakistan from Happening?

Pakistan has set ambitious goals for digitalization, envisioning a future where governance, healthcare, education, entertainment, and more are fully integrated into the digital realm. Digitalization, digital inclusion, and transformation are crucial for accelerating the country’s path to sustainable development. However, this vision of a Digital Pakistan remains distant, as intent has yet to fully translate into action. One of the primary barriers is the low affordability of digital access for many Pakistanis, an issue that has worsened in recent years.

High taxes on devices and services have made digital access prohibitively expensive for millions. These taxes significantly increase the cost of smartphones, tablets, and other essential digital tools, putting them out of reach for many, particularly those in low-income and rural areas. Similarly, elevated service taxes inflate the cost of internet packages and mobile data plans, making continuous connectivity a financial strain for average citizens.

This financial burden deepens the digital divide, preventing a substantial portion of the population from engaging in online education, e-commerce, digital banking, and other vital services. Without affordable access to digital technologies, millions of Pakistanis are left behind in an increasingly digital world, unable to benefit from the economic, educational, and social opportunities that digital inclusion provides.

Mobile Broadband – The Core of Digitalization

As per the Pakistan Telecommunication Authority, the nation boasts an impressive 80 percent mobile teledensity, with a staggering 192 million mobile cellular subscribers. Out of Pakistan’s 136 million broadband users, a significant 133 million are mobile broadband subscribers. These statistics underscore the pivotal role of telecom services as the fundamental conduit for delivering digital access and pioneering new technologies to the average Pakistani.

Mobile broadband isn’t merely bridging the digital divide; it’s also serving as a catalyst in helping Pakistanis secure employment, stay connected, and contribute to the country’s socioeconomic advancement. With widespread mobile broadband access, job seekers harness online job portals, freelance platforms, and social networks to seek employment opportunities both domestically and internationally. It empowers small businesses and entrepreneurs to expand their reach, conduct transactions, and tap into new markets, thereby nurturing economic prosperity.

Additionally, mobile broadband provides access to financial solutions for the underserved masses, enabling them to participate in formal banking systems, access microloans, and engage in digital transactions, thereby fostering financial inclusion and empowerment.

Moreover, mobile connectivity facilitates access to educational resources, telehealth services, and government programs, thereby enriching the overall quality of life. Realizing the vision of a Digital Pakistan necessitates ensuring a smartphone in every hand and broadband in every home. Without this foundational infrastructure, the knowledge-based and digital economy we aspire to cultivate will remain beyond reach.

High Taxes Throttle the Potential Digital Growth

Despite Pakistan’s commendable 80 percent teledensity, nearly half of its population remains deprived of internet connectivity. While discussions about 5G technology are burgeoning and its implementation is on the horizon, 4G (and 3G) penetration in Pakistan stagnates at a mere 55 percent.

This sluggish progress is primarily attributed to the prohibitive costs of mobile phones, compounded by exorbitant taxes on telecom and digital services, further deepening the digital chasm. With an overall tax burden of 34.5 percent on telecom users – inclusive of a 15 percent withholding tax (WHT) and a 19.5 percent general sales tax (GST) – Pakistan ranks among the highest-taxed telecom markets globally. Such excessive taxation renders telecom services financially out of reach for many users, exacerbating issues of affordability.

The local telecom industry advocates for tax rationalization to broaden access to the digital realm for more Pakistanis. Their calls for either abolishing the 15 percent withholding tax or, at the very least, reducing it, are well-founded. While the withholding tax was previously reduced from 12.5 percent to 10 percent in the Finance Act 2021, subsequent plans for further reduction to 8 percent were derailed by the Supplementary Act, which increased it back to 15 percent.

Furthermore, approximately 40 percent of locally manufactured phones are still limited to 2G and feature phone capabilities, significantly perpetuating the digital gap. This continued local production of 2G handsets starkly contrasts with the government’s aspirations to introduce 5G technology, underscoring a notable misalignment between prevailing production practices and the nation’s digital ambitions.

Affordability Impacts Women’s Digital Inclusion Even Harder
The recent GSMA Gender Gap Report has underscored the glaring gender digital divide prevailing in Pakistan. Among various factors contributing to this chasm, affordability stands out as a major barrier hindering women’s access to digital technologies. The steep surge in handset prices and the imposition of high taxes on services have significantly exacerbated the challenge of women’s digital inclusion.

Aamir Ibrahim, CEO of Jazz, remarks on this issue, stating, “In households facing financial constraints, women and girls often find themselves as the last to gain access to mobile phones and internet services. This not only curtails their ability to benefit from digital learning, employment avenues, and vital services but also perpetuates existing inequalities, impeding the pace of our national digital transformation.”

He raises a pertinent question regarding the prevalence of smartphones among teenage boys compared to teenage girls in medium- to low-income Pakistani households, highlighting a disheartening reality. “While affordability remains a significant obstacle to digital inclusion, it disproportionately affects girls despite impacting boys as well, which is regrettable.”

Moreover, the disparity in digital literacy levels and entrenched social norms further compounds this divide, constraining women’s opportunities to leverage digital learning, access employment prospects, and utilize essential services.
Turning Digital Pakistan Vision into Reality
To fully materialize the vision of Digital Pakistan, several decisive measures need to be implemented. Primarily, the abolition or substantial reduction of the withholding tax on telecom services is imperative to enhance the affordability of digital access for millions of Pakistanis. Simultaneously, phasing out 3G services and halting the local manufacturing of 2G and 3G phones emerge as pivotal steps for the comprehensive digitalization of all sectors.
This transition would facilitate a more concerted focus on the production and distribution of 4G and 5G handsets, ensuring broader access to high-speed internet for the populace. Prioritizing the expansion of 4G coverage while laying the groundwork for 5G infrastructure will pave the way for a more interconnected and digitally inclusive society.
These measures, bolstered by unwavering political determination and policy reforms, will expedite Pakistan’s progression towards sustainable development and the realization of a fully digital future.