Historically, the telecom sector has driven Pakistan’s digital FDI flows, but in FY 2022 the sector recorded a net outflow of $29 million.25 Since 2015, inflows have remained low, with the 2020 spike explained by telecom operators’ payment of $103.17 million for licence renewals.26 Recent radio frequency spectrum auctions have seen limited participation, due to taxation, spectrum pricing and the impact of currency fluctuation. With spectrum prices linked to the US dollar, telecom companies operating in PKR face challenges in fulfilling payment obligations for both past and future acquisitions. There is a need to implement reforms that can alleviate financial pressures on operators, paving the way for a more robust and investment- friendly telecom sector. Pakistan’s telecom sector has potential for significant growth, driven by initiatives such as the upcoming 5G spectrum auction,27 the Mobile Virtual Network Operator (MVNO) Policy28 and the Mobile Device Manufacturing and Export Policy.29 These efforts aim to enhance market competition, reduce import reliance and promote local manufacturing. Additionally, the upcoming National Fiberization Policy can expand high-speed internet access, benefiting businesses and individuals across the country. The National Space Policy of 202330 should further support connectivity and technological advances by strengthening Pakistan’s space capabilities. Together, if implemented successfully, these policies are expected to attract FDI, create jobs and bolster Pakistan’s digital infrastructure. Start-ups in Pakistan have been the most important recipients of FDI in new digital activities. By 2021, they had secured nearly $352 million in investments31, and in 2022 investments were at an all-time high of $355 million, with financial technology (fintech), educational technology (edtech) and agricultural technology (agritech) standing out as key emerging sectors. In 2021 alone, a significant boost of $287 million was observed32. However, investment levels decreased to $74 million in 2023 and were at $37 million in November 2024. With strategic support and policy development, the potential for renewed growth in these sectors remains promising. The shift in investment towards start-ups since COVID-19 has driven significant growth in FDI over the past five years, highlighting the potential of Pakistan’s digital economy. Notable deals, such as the $350 million acquisition of Cloudways by DigitalOcean,33 underscore the growing importance of emerging technologies such as blockchain, cloud computing and the internet of things (IoT) for the country’s digital FDI landscape. Digital FDI Initiative: Digital FDI-Enabling Project in Pakistan 14

Digital FDI Initiative Pakistan 2025