Digital FDI Initiative Pakistan 2025

2.2.2 Mapping Pakistan’s digital economy The project set out to understand Pakistan’s digital economy landscape from the perspective of the Digital FDI framework by drawing on consultative insights, survey results and supplementary research to identify challenges/opportunities and prioritize areas of intervention. Digital infrastructure Pakistan’s digital infrastructure, both physical and regulatory, remains underdeveloped. Physical infrastructure Cellular mobile services in Pakistan have achieved significant milestones in connectivity and broadband penetration. As of June 2024,2 network coverage extends to 91% of the population, with 3G/4G signals accessible to more than 81% of the population. The operational infrastructure includes 55,777 mobile sites, of which 95.5% are 4G-enabled.3 These developments have led to an increase in broadband subscribers, reaching 142.3 million by September 2024 – a 91% growth in the last five years.4 Consequently, broadband penetration has surged to 58.4%,a substantial improvement from 32.6% in 2019.5 About 67% fewer women than men have access to internet, highlighting a potential area for greater inclusivity.6 The telecom sector in Pakistan is mobile-first, with 79.1% mobile phone ownership.7 Smartphone usage in Pakistan has been steadily increasing. According to the Pakistan Telecommunication Authority (PTA), by the end of November 2024, 65% of mobiles owned by Pakistanis were smartphones. At the time of this report, fixed broadband penetration stood at less than 2%;8 however, the government has indicated that raising this figure is a national priority and is expected to increase as outlined in the PTA’s Annual Report 2024.9 Currently, the country is being serviced by four mobile service providers: Pakistan Mobile Communication Limited (Jazz), Telenor Pakistan (Telenor), China Mobile Pakistan (Zong) and Pakistan Telecom Mobile Limited (Ufone). All four have foreign ownership of varying levels – ranging from complete ownership to management control only. Prominent fixed-line internet providers include Pakistan Telecommunication Company Limited (PTCL), Nayatel, Transworld and Cybernet, with PTCL having the most significant local ownership. Regulatory infrastructure Increased awareness of the need to strengthen Pakistan’s digital ecosystem in order to attract FDI in the digital economy has driven policy and regulatory measures. These have targeted the export-driven IT sector, the digitalization of important government services and the creation of an environment conducive to FDI. Stakeholders have highlighted the need for better coordination within the institutional architecture, where federal and provincial agencies operate in parallel. Streamlining the regulatory environment and minimizing fragmentation would further strengthen investor confidence. Pakistan’s technology policy falls into two categories:10 –Digital economy regime, governing the digital sector and shaping the development of Pakistan’s digital economy –Investment regime, overseeing the investment climate and business environment for investors in the digital economy There is a need to address both to increase FDI and create an incentive to invest. Digital economy regime There is a need for enhanced alignment between government and regulatory agencies. While the Ministry of Information Technology and Telecommunication (MoITT), the National Information Technology Board (NITB) and provincial IT boards in Punjab11 and Khyber Pakhtunkhwa12 have developed localized digital policies, better coordination can ensure a uniform digital governance framework. Data localization and internet governance measures, influenced by national security and social considerations, shape the digital regulatory framework. Finalizing critical legislation, such as the Personal Data Protection Bill,13 would address concerns from global businesses and rights advocates, strengthening the digital investment climate. Investment regime Pakistan has taken steps to simplify its bureaucratic processes and improve the business environment to attract more digital FDI. Initiatives such as the Pakistan Regulatory Modernization Initiative (PRMI),14 launched in 2021, and the establishment of the Special Technology Zones Authority (STZA) have contributed to these efforts. The Foreign Investment (Promotion and Protection) Act of 202215 offers safeguards for FDI, but its benefits are yet to be fully realized due to pending cases. Expediting documentation processes and complaint resolution and arbitration mechanisms can improve the investment landscape. Pakistan has improved its ranking in the World Bank’s Ease of Doing Business report,16 and further simplification of institutional processes could bolster investor confidence. A detailed map of important legislation, regulations and policies that govern the digital and investment landscape can be found in Annex 1.Pillar 1 Digital FDI Initiative: Digital FDI-Enabling Project in Pakistan 10