Aitizaz Hassan

According to the National ICT White Paper released by the Ministry of Information Technology and Telecommunication (MoITT), entrepreneurship in Pakistan is already on the rise.

Since 2010, nearly 800 startups have been established, 60% of which are still active with 100% successful fundraising and investment, indicating vast opportunities for local startups and increased investors’ interest. Correspondingly, a startups ecosystem is slowly maturing in Pakistan.

The white paper said the Government of Pakistan, at both the provincial and federal level, is carrying out initiatives to promote startup culture. License for Pakistan's first private equity (PE) and venture capital (VC) funds was approved by the Securities and Exchange Commission of Pakistan (SECP) in 2017.

“Universities and academia promote entrepreneurship, particularly by providing space for students to test and incubate potential businesses and learn entrepreneurial skills,” said the white paper.

Startups were provided funding by corporations, foundations and government for early stage to accelerate their growth. Planet N, a tech investment firm, has invested in 14 startups across e-commerce, fintech, edutech and renewable sectors. Incubators provide management services and secondary support services to help new startups’ setup on ground. The government has funded incubation centers in all four provinces.

According Badar Khushnood, Chairman Pakistan Software House Association (P@SHA), the startup has shown appreciable performance despite challenging environment.

Badar suggested that firstly the government should revise startup definition as per global standards. He said the existing startup definition by the SECP does not include a few startups that have a chance of scaling.

“This will limit the availability of any facility or scheme the government will offer to startups. There is a need to revise and standardize the definition of startups. For example, the current SECP definition has a turnover limit of Rs100 million (565K USD). In comparison, India has 1 billion INR (13.5 million USD) limit,” Badar mentioned.

He said that when the founders sell shares or when the employees sell options, the government should put a flat tax rate of 5% to incentivize them, aiming to bring cash back.

Badar said that companies are not incentivized to bring revenue to Pakistan, but only cost of operations. Founders do not see benefit in liquidating their stocks in companies abroad and bring cash to Pakistan, and rather they park their revenue outside Pakistan.

“This trend does not help Pakistan's economy. A financial rebate program would help provide incentives to founders to bring cash back in Pakistan,” Badar said.

The P@SHA chairman said Pakistan needs to improve access to finance in startups business. He said startups need collaboration with commercial banks to facilitate the framework to secure investment. There is an absence of early-stage startup funding, for which public-private partnership is needed.

“To build an organized startup ecosystem in Pakistan, research and development area must be incentivized. This is a support policy practiced throughout the IT economies. Such policies encourage innovation and entrepreneurship through guidance, mentorship, and support,” he said.

Credit : Independent News Pakistan-WealthPk