Digital future
The news that Pakistan is facing its first economic contraction in 68 years is difficult. Like the rest of the world, Pakistan is not immune to the headwinds flowing from the pandemic. With disruption in every aspect of life, societies are relying on technology more than ever to communicate with families, keep businesses going and access essential services. Accelerating the pace of digital technology adoption in Pakistan has never been timelier.
Across Asia, the digital economy has been a crucial factor in transforming economies and communities, and spurring economic growth. Indonesia has ridden on the back of a vibrant startup community to create five unicorns in the e-commerce, digital payments, and travel sectors. These companies are each valued at $1 billion or more. Malaysia has secured global investment enabling domestic and international companies to move into hi-tech manufacturing. Singapore's digital prowess has enhanced its trade relations with global markets. A focus on digital economy development means these countries have been able to leverage opportunities from digital transformation.
As Pakistan embarks on its own transformation agenda - the 'Digital Pakistan Vision' - lessons from across Asia can be useful. Pakistan is a market of scale blessed with a youthful population. The IT export sector is vibrant, start-ups like Airlift, Zameen and Patari are being funded and noticed, and the ease of doing business is improving.
However, a significant digital divide exists with only 35 per cent of the population having internet access. Covid-19 has shown that without comprehensive strategies to provide internet access, communities suffer and young people are disadvantaged.
While policy discussions are underway in areas like e-commerce, data protection, content, privacy, and taxation, the government can take steps to ensure that the Digital Pakistan Vision delivers tangible outcomes. Cross-border data flows must be promoted, data governance frameworks aligned with global norms and standards, and stakeholder consultation and collaboration prioritised.
Digital economies require the free flow of data across borders to function, and regulations that support cross-border data flows are a key element. A McKinsey study shows that over a decade, data flows collectively have raised world GDP by approximately 10pc and contribute $2.8 trillion to annual trade. That contribution equates to a larger share of the increase in global GDP compared to the worldwide trade of physical goods.
The role of cross-border data flows in transforming global economies cannot be underestimated. Every sector including manufacturing, agriculture, services, and retail, is leveraging data for efficiency, productivity, supply chains, and innovation.
Conversely, a report by the European Centre for International Political Economy found that data localisation can reduce GDP, as much as 1.7pc in Vietnam, 1.1pc in China, and 0.8pc in India.
Despite intentions to protect data, localisation policies are likely to increase risks around privacy and cybersecurity, lessening network resilience and raising costs for business. SMEs are on the losing end when they are unable to leverage technology like cloud-powered software, data analytics, and AI. Digital transformation requires a robust digital governance framework to unleash the full value of the digital economy.
Singapore's Personal Data Protection law and the Asia Pacific Economic Cooperation Cross-Border Privacy Rules System are examples of the responsible use of technology, ensuring data security, protection and privacy without compromising innovation. Adopting reasonable limitations on the collection, use, and disclosure of personal data, and implementing permitted transfer mechanisms like those provided in the region, Pakistan can drive digital growth whilst protecting individuals' data.
As Pakistan shapes its export strategy, the Australia-Singapore Digital Economy Agreement offers much to emulate. Setting an international benchmark for the wider region, DEA's trade rules and comprehensive framework promotes seamless data flows (while prohibiting data localisation) in order to boost digital trade. Ensuring digital policies keep pace with technological advances, industry dialogue should become a standard mechanism in policymaking, ensuring that Pakistan's policies are fit-for-purpose and future-proofed.