Digital Transformation: Pakistan is Now Online!

[Riaz Haq]

Pakistan's digital transformation is in full swing. Over three-quarters of Pakistanis living in the top three metros of Karachi, Lahore and Islamabad are connected to the Internet, according to a report titled "Journey to Digital" produced by global tech giant Google and Kantara consultants. Researchers found that two-thirds of urban and nearly half of rural Pakistanis regularly use the Internet in the South Asian country of 220 million, the 5th most populous nation in the world. It has a young population with the median age of 22.8 years. 46% of Pakistanis access the Internet everyday.  They use the Internet for education, entertainment, shopping and to search for information.

Over Half of All Pakistanis Are Connected to the Internet. Source: Google-Kantar

Pakistan has seen a phenomenal growth of 3500% in broadband subscriptions over the last 8 years . Pakistanis now own more than 103 million smartphones with mobile broadband subscriptions. In a Youtube presentation of the report, Faraz Azhar, Industry Head, Performance, South Asia Frontier Markets, Google said: “With half of its population on the internet - Pakistan is now online!"  

Google Search and YouTube are the most popular Internet applications in Pakistan, according to the study. YouTube is used by nearly 90% of all internet users in Pakistan for streaming music and watching video/TV, and 38% of Pakistan's internet users go to YouTube in the research phase of their shopping journey. 

Pakistan has also experienced an e-commerce boom in the midst of the COVID pandemic. 71% of Pakistani shoppers find purchasing products or services online easy, while 66% find it convenient. Another 54%  find that online shopping websites or apps give personalized product recommendations, which answer common questions. Two-thirds of consumers believe that online shopping is the way forward. They say they will continue to buy products or services online after the COVID-19 pandemic.    

Faraz Azhar, Industry Head, Performance, South Asia Frontier Markets, Google said: “With half of its population on the internet - Pakistan is now online! This is the first time Google and Kantar released a study to understand more about Pakistan’s internet population. But it’s not only about people getting online, this research has uncovered new insights and behaviors that show how COVID is impacting online behaviour and the digital opportunities waiting to be unlocked.” 

Global Investors of Pakistani Startups. Source: Google-Kantar

"More people are coming online in Pakistan, creating a great opportunity for eCommerce businesses - if they are ready to seize it. As we see more exploration of the internet beyond social, e-retailers can capture natural cross-category purchasing on its rise, but only if they have first established themselves and their product offering in an online marketplace," he said.

Pakistan Startup Funding. Source: Google-Kantar

With expanding Internet infrastructure and rapidly growing user base, Pakistan is now seeing robust growth in venture money pouring into technology startups. Pakistani startups are on track to attract more than $230 million in funding in 2021, more funds than all the money raised by Pakistani startups in their entire history. A recent example is Kleiner Perkins, a top Silicon Valley venture capital investment firm, that led series A round of $17 million investment into Pakistani start-up Tajir. The startup operates an online marketplace for small store merchants in Pakistan. The announcement came via a tweet by Mamoon Hamid, a Pakistani-American Managing Partner at Kleiner Perkins who led the investment. Last year, Tajir raised a $1.8 million seed round.  The company's revenue has increased by 10x since its seed round. 

Pakistan Technology Exports Trend 2007-2021. Source: Arif Habib

Pakistan's technology exports are experiencing rapid growth in double digits over the last decade. Total technology exports jumped 47% to $2.1 billion in fiscal year 2020-21. 

Pakistan University Enrollment Growth. Source: Encyclopedia of High...

The foundation for Pakistan's digital transformation was laid with the higher education reform and telecommunications deregulation and investments starting in the year 2001 on President Musharraf's watch. With huge increase in higher education funding, Higher Education Commission Chairman Dr. Ata ur Rehman succeeded in establishing 51 new universities during 2002-2008. As a result, university enrollment (which had reached only 275,000  from 1947 to 2003) soared to about 800,000 in 2008. This helped build a significant human capital that drove the IT revolution in Pakistan.      

Here's a video presentation of Pakistan's "Journey to Digital":

https://youtu.be/7mlSvA7MyWo

 

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[Riaz Haq]

Digital Pakistan Policy may be launched by end of August


https://www.brecorder.com/news/40109791


ISLAMABAD: The Digital Pakistan Policy (DPP) 2021 is expected to be launched by end August 2021, envisaging providing the necessary elements to tab the digital global market, economic growth and citizen empowerment. This was stated by Member Information Technology (IT) of the Ministry Information Technology and Telecommunication Syed Junaid Imam, while addressing at a two-day consultative meeting on DPP 2021.

Oxfam in Pakistan and Bargad in collaboration with Ministry of Information Technology and Telecommunication (MOITT) organised consultative meeting on DPP 2021. The meeting discussed ways to include rural youth especially women, transgender persons, and disabled persons in the DPP 2021.

Participants were briefed about the process of developing the DPP 2021 by the ministry officials.

Imam said the DPP 2021 was being formulated through a comprehensive consultative process from all four provinces and the two regions (Gilgit-Baltistan and Azad Jammu and Kashmir).

He said the policy was a start to the digital era for Pakistan and would provide the necessary elements to tab the digital global market.

Digitisation is not only about business, it is also for providing services to marginalised groups. Overall objective of the DPP 2021 was economic growth and citizen empowerment, he added.

Sabiha Shaheen, executive director, Bargad said that policy design was as important as the policy implementation. The real issue is to make policy work for the marginalised groups in implementation. Seher Afsheen from Oxfam stressed the need for robust digital transformation.

Highlighting the benefits of a digital Pakistan, she shared how she foresees 'the DPP 2021' paving the way to enable growth and development, especially for the youth and women, who represent roughly 60 percent and 49 percent respectively of the population. Ensuring women and girls have equal access to Information Computer Technologies will help reduce inequalities, support gender equality, increase productivity, and improve access to health and education, thereby ensuring equitable participation in social, political and economic spheres, thus, breaking barriers of isolation.

Digital transformation can help in creating a future that is equal, where women and girls along with marginalised communities will be able to access better opportunities and live without the menace of poverty. Barkan Saeed, chairman PASHA, said the digital policy should specify actionable initiatives.

Rural youth need affordable internet, devices and skills to benefit from Pakistan's potential in export market globally. Raza Sukhera gave a presentation on the DPP.

The meeting was attended among others by officials of the MoITT and representatives of the Federal Commerce Ministry, Kamyab Jawan National Youth Development Programme and Office of the PM Advisor on Youth Affairs, Ministry of Planning, Development and Special Initiatives, Ministry of Law and Justice, Ministry of Climate Change, National Commission on the Status of Women, Islamabad Women Chamber of Commerce and Industry (IWCCI), Pakistan Software Houses Association for IT and ITES, Oxfam Youth Advisory Board (YAB), academia, INGOs, civil society and youth organisations/networks, private sector, incubators, practitioners of digital social enterprises, transgender persons, differently-abled persons, and parliamentarians. The day focused on sharing the findings and progress of DPP 2021 with the participants followed by group works around three pillars of the policy, which were an inclusion of (1) rural youth especially women, (2) transgender persons, and (3) differently-abled persons.

[Riaz Haq]

Pakistan seeks WB’s technical, financial support to build digital infrastructure

https://nation.com.pk/04-Aug-2021/pakistan-seeks-wb-s-technical-fin...

The finance minister shared with the World Bank team that Pakistan would welcome the knowledge of the World Bank team to promote the skills of the IT graduates in the country. The World Bank team conveyed their willingness for providing guidance and informed that the Bank was preparing an operation on digital economy with the Ministry of Information Technology. In his concluding remarks the finance minister thanked the delegation for World Bank’s continued guidance and collaboration on various development projects. 

The minister for economic affairs has also appreciated the World Bank’s continued support to Pakistan.   He shared that 57 projects worth $ 12.9 billion are under implementation under WB’s financing in the priority areas such as education, health, social protection, finance, agriculture, energy and communication across the country. During the outgoing fiscal year, the government signed sixteen (16) projects worth $ 3.64 billion with World Bank.  The minister also appreciated the World Bank for its global initiative amounting to $ 12 billion to help developing countries for procuring Covid-19 vaccines. He highlighted that Pakistan’s efforts to curtail the Covid-19 pandemic through smart lock down approach and addressing the socioeconomic challenges through fiscal stimulus package under the Prime Minister Imran Khan’s vision of lives and livelihoods is being highly recognised and appreciated by the global community. 

While discussing the future interventions, the minister for economic affairs emphasised on enhanced connectivity in rural areas though improved road and digital networks. Rural roads connectivity is one of the key components for rural development. An efficient and reliable rural road network promotes access to social services such as health facilities and educational institutions and enhanced economic opportunities through increased agricultural income and employment. Similarly, cold storage is crucial to control the post harvest losses and price fluctuations of perishable commodities. The minister for economic affairs also highlighted that Pakistan has huge potential to enhance its IT exports. The minister proposed that World Bank may provide technical and financial support to build digital infrastructure including fiber optics network and incubation centres for specialised training and certification of IT experts. 

[Riaz Haq]

Mobile Distributor Plans Pakistan’s Biggest Private Sector IPO

https://www.bloomberg.com/news/articles/2021-08-06/mobile-distribut...

Air Link Communication Ltd. plans to raise at least 5.85 billion rupees ($36 million) through an initial public offering this month, which would be the largest from a non-state firm in Pakistan.

The Lahore-based company plans to sell new and existing shares at a price between 65-91 rupees each, Chief Executive Officer Muzzaffar Hayat Piracha said in a reply to queries Friday. It will take investor orders on Aug. 30 and 31 and then price the offering.

Pakistan has seen a record streak of IPOs this year. Air Link, which started operations about a decade ago and has since become one of the largest distributors of phones in the country, saw sales rise 50% to 3.6 million units in year ended June.

The company plans to issue 60 million new shares and Piracha will sell 30 million from his holdings, said Kamran Nasir, CEO at JS Global Capital Ltd., consultant and bookrunner to the transaction. The IPO will be the largest since Interloop Ltd. raised about 5 billion rupees in 2019.

Air Link, which has also recently expanded into mobile assembling, plans to use the funds to expand its distribution network. It aims to have 150 outlets by 2026 from 14 currently, which will boost margins together with the assembly business, said Nasir.

The company expects its revenue to triple to 129 billion rupees and net income surging 500% to 9.2 billion rupees by fiscal 2025 from 2020, according to Nasir.

[Riaz Haq]

In what seems like an odd move for all involved, Pakistan's telecommunication regulator – the Pakistan Telecommunication Authority (PTA) – has announced approval for Lucky Motor Corporation (LMC) to manufacture Samsung mobile devices.


https://www.theregister.com/2021/08/11/in_pakistan_a_car_company/

The local automobile manufacturer is a joint venture between Lucky Group and South Korea's Kia Motors, and manufactures and distributes Kia cars built in a purpose-built plant in Karachi's Bin Qasim Industrial Park.

"The authorization to manufacture Samsung Mobile devices in Pakistan is a landmark achievement and will further revolutionize the vibrant mobile manufacturing ecosystem in the country by ensuring presence of major local and foreign players in the market," declared the regulator.

The PTA has issued similar Mobile Device Manufacturing (MDM) authorizations to 25 foreign and local companies to produce the tech in Pakistan. The devices will be both sold in the country as well as exported.

Samsung and Lucky inked the deal back in July. The production facility will be located at LMC's existing Karachi auto plant and is scheduled for completion by the end of 2021.

PTA tweeted, celebrating the job opportunity potential stemming from the new plant:

Samsung's decision to partner with an automobile manufacturer may seem unusual but, according to Pakistani brokerage and research firm Topline Securities, Samsung has form setting up factories in the region to serve domestic and export markets. In Bangladesh, for example, Samsung uses a local factory established in 2018 to produce 95 per cent of the 2.5 million mobile devices sold in-country.

Pakistani English-language daily The Express Tribune offers another reason the Lucky Group could be interested: the paper reported this week that an increase in prices for steel and other raw materials, plus shipping cost hikes, have caused a rise in vehicle prices even as COVID-repressed demand for cars was gradually rebounding.

The deal means Lucky Group has diversified into more affordable products, while Samsung has boosted local capacity, given local buyers a good reason to consider its wares, and diversified its manufacturing base.

[Riaz Haq]

Pakistan’s Airlift raises $85 million for its quick commerce startup, eyes international expansion

https://techcrunch.com/2021/08/17/pakistans-airlift-raises-85-milli...

A one-year-old startup that is attempting to build the railroads for e-commerce in Pakistan has just secured a mega round of funding in a major boost to the South Asia nation’s nascent startup ecosystem.

Airlift operates a quick commerce service in eight cities including Lahore, Karachi, and Islamabad in Pakistan. Users can order groceries, fresh produce, other essential items including medicines as well as sports goods from Airlift website or app and have it delivered to them in 30 minutes.

The startup said on Wednesday that it has raised $85 million in its Series B financing round at a valuation of $275 million. Harry Stebbings of 20VC and Josh Buckley of Buckley Ventures co-led the financing round, which is by far the largest for a Pakistani startup.

Sam Altman, former president of Y Combinator, Biz Stone, co-founder of Twitter and Medium, Steve Pagliuca, co-chairman of Bain Capital, Jeffrey Katzenberg, ex-chief executive of Disney and Quibi, and Taavet Hinrikus, founder and chief executive of TransferWise also participated in the new round, which brings the startup’s to-date raise to $110 million.

Stanley Tang, co-founder of DoorDash, Simon Borrero, founder and chief executive of Rappi, Baastian Lehman, founder and chief executive of Postmates, Quiet Capital and Indus Valley Capital also participated in the new round.

Airlift started as a transit business, building a service similar to Uber for air conditioned-buses in Pakistan. The startup quick amassed traction, clocking over 35,000 rides a day. And then the pandemic arrived, disrupting all mobility in the country.

That’s when Usman Gul, the founder and chief executive of Airlift, took the call to pivot to quick commerce, he told TechCrunch in an interview.


“This entire space of quick commerce is on the brink of global transformation. Airlift is in the forefront for leading that transformation in Asia and Africa,” he said. Gul said he plans to expand the service to many international markets in the next few months.

“Airlift’s early traction in Pakistan is a window into the future for how quick commerce will play out in the developing world,” said Altman in a statement.

Airlift today operates over 30 dark stores and processes hundreds of thousands of orders each month.

Gul said the startup has found that setting up these fulfillment centers is the most efficient way to serve the market. “The more middlemen you introduce in this chain between the items and the customers, you begin to compromise the experience,” he said.

Within the first twelve months of launch, Airlift has been able to reduce its cost of blended customer acquisition to $5 and unit costs to $2.50, it said.

Gul said the startup, which today employs over 100 people, plans to expand to more categories including electronics. “The idea is to expand to new categories and build the railroads to move consumer goods from manufacturers to consumers,” said Gul.

He left his job at DoorDash and moved back to Pakistan to start Airlift. “The idea was to create impact at the base of the pyramid and solve problems that would enrich millions of lives — for whom change is desperately needed. That drove my transition frankly,” he said.

“Transparently, when I first met Usman, I knew this was an entrepreneur who was going to create an industry-defining company. Humble, ambitious and strategic, Usman will be one of the great founders of this generation,” said Stebbings in a statement.

[Riaz Haq]

#Karachi-based #startup Bazaar completes series A round. #Pakistan's B2B marketplace and digital ledger platform Bazaar has raised $30 million led by #SiliconValley-based early stage VC Defy Partners & #Singapore-based Wavemaker Partners. https://tcrn.ch/3j9oAyj via @techcrunch

A one-year-old startup that is building a business-to-business marketplace for merchants in Pakistan and also helping them digitize their bookkeeping is the latest to secure a mega round in the South Asian market.

Bazaar said on Tuesday it has raised $30 million in a Series A round. The new financing round — the largest Series A in Pakistan — was led by Silicon Valley-based early stage VC Defy Partners and Singapore-based Wavemaker Partners.

Scores of other investors including current and former leaders of Antler, Careem, Endeavor, Gumroad, LinkedIn and Notion as well as new investors Acrew Capital, Japan’s Saison Capital, UAE’s Zayn Capital and B&Y Venture Partners and existing investors Indus Valley Capital, Global Founders Capital, Next Billion Ventures, and Alter Global also participated in the new round.

One way to think about Bazaar is — especially if you have been following the Indian startup ecosystem — that it’s sort of a blend between Udaan and KhataBook. “That’s a good way to describe us,” said Hamza Jawaid, co-founder of Bazaar in an interview. “We had this benefit of hindsight to not just look at India but other emerging markets,” he said.

“We saw lots of synergies between these two. If you look at commerce, you have to acquire every single merchant in every single category differently. Whereas with Khata, merchants in any city and category can download it. So effectively, it’s a great customer acquisition tool for you,” he said on a WhatsApp call, adding that this also provides greater insight into businesses.

Bazaar’s business-to-business marketplace, which provides merchants with the ability to procure inventories at a standard price and choose from a much larger catalog, is currently available in Karachi and Lahore, the nation’s largest cities, while Easy Khata is live across the country.

At stake is a booming $170 billion retail market in the world’s fifth-most populous nation that is yet to see much deployment of technology, said Saad Jangda, Bazaar’s other co-founder. Both of them have known each other since childhood and reconnected in Dubai a few years ago. At the time, Jawaid was at McKinsey & Company while Jangda was working with Careem as a product manager for ride-hailing and food delivery products.

There are about 5 million micro, small, and medium-sized businesses in Pakistan. Like India, even as a significant portion of the population has come online, most merchants remain unconnected, said the founders, who surveyed shops going door-to-door.


“We’ve been investing in FMCG B2B marketplaces across the region since 2017. After working with Hamza and Saad over the past year, we’ve been impressed by their customer-centric approach to product development and the speed of their learning and execution,” said Paul Santos, Managing Partner at Wavemaker Partners, in a statement.

“It’s no surprise that they’ve received glowing reviews from their customers and partners. We’re excited to support Bazaar as they solidify their market leadership and digitize Pakistan’s retail ecosystem,” he added.

The startup said it has amassed over 750,000 merchants since launch last year. And it appears to have solved a problem that many of its South Asian peers are still grappling with: Retention. Bazaar said it has a 90% retention rate.

I asked Jangda if he plans to expand to the ‘dukaan’ category. Several startups in Asia are currently building tools to help merchants set up online presence and accept digital orders. He said the market is currently not ready for a dukaan product just yet. “The B2C market is still developing, so there is not so much demand from the consumer side yet,” he added.

[Riaz Haq]

#Pakistan to set up #technology zones across the country to “provide special incentives to attract investors, builders, and technology companies to partner with the government” and also provide one-window facilitation to local and international companies https://gn24.ae/c3552aad3f02000

Pakistan will set up special technology zones across the country to create new jobs and opportunities for the bulging youth population.

Presiding a meeting on the establishment of technology zones, Prime Minister Imran Khan said that the top priority for his government is to support youth by harnessing the power of technology and creating an enabling environment for strong partnership among educational institutions, industrial sector and government.

In the meeting, attended by relevant ministers from all provinces and regions including Gilgit-Baltistan and AJK, the premier directed officials to provide all facilities available in developed countries to the investors, entrepreneurs, and business community in the new science and technology zones in Pakistan.

Pakistan government established Special Technology Zones Authority (STZA) in January this year to boost the IT sector and create more jobs in the world’s fifth most populous country.

“STZA is building an integrated technology roadmap to drive innovation and boost economy by leveraging technology and empowering millions in Pakistan” Amer Hashmi, the chairman of STZA, told Gulf News. “This is Pakistan’s opportunity to leapfrog to a new era of innovation” and create a “future brimming with opportunities for young people.”

[Riaz Haq]

Mattias Martinsson
@Tundra_CIO
Have followed #Pakistan for 15 years now. Can't recall any time when VC activity was anywhere near what we've seen over the last few months. Impact of reforms kicking in?
#EmergingMarkets #FrontierMarkets

https://twitter.com/Tundra_CIO/status/1430457972883341313?s=20

[Riaz Haq]

What the 2020 Companies (Amendment) Ordinance means for startups

https://profit.pakistantoday.com.pk/2020/06/21/what-the-2020-compan...

The new law takes into account many of the changes that entrepreneurs and venture capitalists had been clamouring for, but there is still a long way to go for Pakistani startups

1. Paying people in equity will become easier
One of the biggest changes in the new law ratified by the President on May 4, 2020 – and one that both venture capitalists and entrepreneurs had been eager to see – is the easing of rules around paying employees in equity. A whole host of rules around this matter are set to be relaxed under the ordinance and could significantly boost interest among young college graduates in working for startups.

The first change proposed is expanding which companies can issue equity compensation. In the previous law, only public limited companies (whether they be publicly listed or privately held) were allowed to issue employee stock options. Now, even private limited companies, especially companies classified as startups, will be able to offer such benefits as well.

“Sometimes when companies are young and new, they cannot afford to pay their employees market competitive salaries. In such cases, they issue employee stock options,” said Barrister Ahmed Uzair, a partner at AUC Law, a law firm based in Lahore. “With the new amendments, now even private companies may issue the same for their employees and may also do so without needing any further approval from SECP.”

Beyond simply allowing companies to issue stock options, however, the company has also made it easier for founders to consider the value of their ‘sweat equity’ – or the value of the work they put into the startup without cash compensation – in the valuation of the company.

“Strictly speaking it [considering sweat equity in valuing a company] was allowed but required valuation by the SECP which ultimately decided how much worth could be assigned to a resource’s worth,” said Uzair.

Under the current regulations, the value of sweat equity would be determined by an independent valuation advisor – typically the advisory arms of major accounting firms – and submitted to the SECP for approval before such valuations could be accepted. Under the proposed regulations, however, startups would be exempted from the requirement of that valuation exercise, which can be quite expensive and often end up costing hundreds of thousands of rupees in advisory fees.

Many costly regulatory requirements have been relaxed for startups
The proposed legislation also seeks to remove many other bureaucratic requirements that may seem minor but add to the headache and cost of running a startup. These include things like the specific time limit during which the company has to deposit the cash it needs for its startup capital, or having a chartered accountant from the very beginning.

The startup capital deposit requirement was one that was created as part of the 2017 Companies Act, and it stated that if a company had declared a certain amount as its paid-up capital, that amount would need to be deposited into a company-owned bank account within 30 days of registration. This requirement has now been relaxed for companies classified as startups.

However, it is not yet clear as to how long companies will now have to deposit the cash, merely that the SECP now has the discretion to allow for extensions in that deadline.

Another requirement that has now been relaxed is the one requiring a chartered accountant. Under the amended law, companies were required to have a chartered accountant – duly qualified and a member of the Institute of Chartered Accountants of Pakistan (ICAP) – sign off on their financial statements as an auditor.

[Riaz Haq]

What the 2020 Companies (Amendment) Ordinance means for startups

https://profit.pakistantoday.com.pk/2020/06/21/what-the-2020-compan...

That, in itself, seems like a reasonable regulation. However, combined with the artificial shortage of accountants in Pakistan created by ICAP, the expense of hiring a chartered accountant ends up being somewhat prohibitive for startups seeking to conserve their cash burn rates. An easing of that requirement, as expected, is welcomed by many entrepreneurs.

Then there are other minor regulations that have also been eased, such as the requirement to have a company seal on all documents that need to be signed by senior company executives.

The number of companies eligible for regulatory relaxations for startups has been increased
An important change in the proposed regulation has been an expansion in the definition of what constitutes a startup. Under current law, a company that has been in operation for five years or less is considered a startup, and there are few, if any, other ways to have a company be classified as such. Under the new regulations, however, companies that have been in existence for up to 10 years will be able to be classified as a startup.

In addition, there will now be other elements of the definition of a startup that will allow more companies to be classified as such. Companies with revenue of less than Rs500 million – or any other amount subsequently defined by the SECP – will also fall under that definition, as will companies that can demonstrate that they are “working towards the innovation, development or improvement of products or processes or services, or is a scalable business model with a high potential of employment generation or wealth creation.” In other words, innovative startups.

The expansion of the definition of a startup means that more companies will be able to take advantage of the regulatory relaxations that have been granted to startups under the proposed legislation. The goal of this provision appears to be to expand the scope of the startup ecosystem in Pakistan.

Startups will now be able to buy back shares from departing founders
This provision is likely to be especially useful for the investors and current management of Patari, where much of the founding team has been forced to depart the company owing to allegations of sexual harassment against one of the founders and allegations of aiding a cover up on the part of the others.

In such circumstances – or in situations where founders leave owing to disputes with each other or with investors – it can often create an awkward situation where the departing founder still owns a large chunk of the company’s equity but is no longer a contributing member of the management team. For startups, this is a very common scenario, and one that is made worse in Pakistan by the fact that, under the very recent law, only publicly listed companies were allowed to buy back their own shares.

Under the proposed legislation, startups will be able to buy back their own shares, in addition to all private limited companies. This allows for the amicable settlement of disputes between founders and does not require one founder or investor to buy out others, but rather have the company’s collective resources be made available to resolve such issues.