Digital Ecosystem Diagnostic in Developing Economies

The #digital sector has become a critical driver of economic growth, social inclusion, and #government efficiency. This #presentation provides a #diagnostic #framework for analyzing the state of a country's digital #ecosystem. The framework focuses on 4 key pillars: digital infrastructure, digital society, digital government, and digital economy. We apply this framework to four diverse countries: #Brazil, #Estonia, #Pakistan, and South Korea. The analysis highlights the unique strengths and challenges faced by each country in their digital transformation journey. By examining these diverse cases, the presentation offers valuable insights for policymakers aiming to promote a digital ecosystem that empowers citizens, drives economic development, and delivers efficient government services. Several challenges need to be addressed:
Limited internet access: Especially in #rural areas, high costs and lack of awareness hinder #internet #penetration.
Uncertain #regulatory #environment: #Investors are hesitant due to an inadequate framework for the #ICT sector.
High cost of doing #business: #SMEs face challenges due to high taxes, complex regulations, and limited access to financing.
Brain drain: Weak economic growth leads #skilled professionals to seek opportunities abroad.
The presentation proposes solutions that require collaboration between the public and private sectors:
Public sector as an enabler: Streamline regulations, incentivize innovation, and provide affordable #financing for the private sector.
Increased government investment: Expand digital infrastructure like high-speed broadband and data centers.
Support for #digital exports: The government can assist with market research, #trade facilitation, and skills development.
Strategic #partnerships: Leverage bilateral and multilateral development partners for #funding and #collaboration.
Public-private dialogue: Think tanks like #SDPI can facilitate discussions to shape supportive #policies and regulations.
Business #community involvement: Chambers of #Commerce can offer capacity building, #training, and #networking #opportunities for digital businesses.

1. Country Digital
Ecosystem Diagnostic
for PAKISTAN
Report Launch
July 22, 2024
CountryDigitalEcosystemDiagnosticReport
www.sdpi.org|www.sdpi.tv

2. OVERVIEW
GLOBAL CONTEXT METHODOLOGY KEY
DIGNOSTIC
FINDINGS
DIAGNOSTIC
FINDINGS
Q&A +
WHAT`S NEXT?
→ROADMAP FOR
DIGITAL PAKISTAN
OVERVIEW

3. d
KEEPING UP WITH TECH: 5G, AI, ethics, legislation, innovation
HYPERCONNECTIVITY: IoT, social media, platformization
DATAFICATION:predictive data analytics, management, ML
CYBERSECURITY & PRIVACY: awareness, resilience
DEMANDING CITIZENRY: personalised UX, instant-ness, M-1st
OPEN GOVERNANCE MODELS: collaborative, anticipatory, PPP
WAR FOR TALENT: dynamic skills aquisition, upskilling, reskilling
PERSISTENT ASYMMETRIES: digital inclusion & access (DAI)
GLOBAL
CONTEXT

4. KOREA
Focused & Walked
the talk
ESTONIA
From Post-Soviet ashes to
unicorns
BRAZIL
A steadily rising
regional giant
Started:2000s, expanded semiconductor / consumer
electronics industries (Samsung, LG)
Today: TOP 10 EGDI, GII 2023
•Apps, apps, apps
•Startups & IT SMEs
•High datafication 4 public good
•Smart-Agri, Health, Urban,Transpt, Ecology
Started: 1990sTiger Leap Initiative
Efficiency, access, IT skills, security
Today: TOP 10 EGDI, GII 2023
Highest #unicorns per capita globally
•X-Road & eID →e-services
•E-Residencyimports talent/ business
•Data embassy
Started: 2000s, 215 mil.Pop,
infrastructure, e-commerce
Today: Digital leader in LA
•4G @92%
•Int per Todos–PPP Open digi
Architecture, 100 mil. unserved
•PIX instant-payment app 77%
•Mercado Libre —Amazon of LA

5. INCLUSIVE
Whole of Society
Whole of Business
Whole of Government
•Massive IT upskilling (citizens, SME, govt)
•Efficiency via e-services
•User centric value adding
STRATEGIC Enabling
innovation
•High growth sectors
•Test bedding
•Ease of doing business
VISIONARY
Phased Building Blocks Long-
term Walking the Talk
•Infrastructure
•eID, dataflows
•Trust-by-design

6. Overview of MOITT–ADB–SDPI Technical Assistance
CountryDigitalEcosystemDiagnosticReport. www.sdpi.org|www.sdpi.tv
In2023MOITTapprovedADB`sTechnicalAssistanceProject"TransformativeDigitalFuture:Growth
StrategyandRoadmap"inPakistan.SDPIservingasanimplementingpartner.
OUTPUT 1
Country Digital
Ecoysystam Diagnostic
OUTPUT 2
National Digital Policy
Framework
&
Digital Roadmap
for Pakistan

7. Methodology: EcosystemicApproach
Rapid Provincial Assessment: Survey: All provinces
70 non-IT responses,
Desktop Review: 4 key digital pillars & 5 enablers
Situational status, peer comparisons, readiness & dynamics
Extensive Stakeholder Consultations: Islamabad, Lahore, Karachi

8. Diagnostic Framework

9. Insights on process
CountryDigitalEcosystemDiagnosticReport. www.sdpi.org|www.sdpi.tv
Limited available data & deeper sector analytics
Hungry & engaging private sector, provinces
Narrative path dependencies
Consensus on digital = high growth sector
Harnessing complexity: omitted deep dives at sectoral & zillah/tehsil level

10. Macro Lens: Pakistan in global indices
Source: UNDESA, E-Government Development Index
Ranked 150th/193 in 2022
Regressing over time
Below regional averages

11. Pakistan Ranks high in Knowledge, Tech, Creative Outputs
GLOBAL INNOVATION INDEX 2023
WIPO

12. Macro Lens: Pakistan`s innovation outputs globally competitive

13. High scores: innovation & digital economy
Low in Regulation, SDG impact & Inclusion

14. Pillar 1: Digital
Infrastructure
Access
CountryDigitalEcosystemDiagnosticReport, www.sdpi.org|www.sdpi.tv

15. Connectivity & coverage rising, especially mobile penetration
CountryDigitalEcosystemDiagnosticReport. www.sdpi.org|www.sdpi.tv
3G Coverage: 80 %
4G Coverage: 76 %+
5G: In the plans
Source: ITU 2022

16. Pakistan`s Connectivity lags behind regional peers
16
21
32
26
39
33
62
48
29
46
40
Penetrationandqualityoffiber
connectivity(scale0-100)
Individuals using the Internet
(% population)
Average fulfillment %of ICT
Development Index and Network
Readiness Index
(scale 0-100)
Pakistan Bangladesh Vietnam India
74

17. Growing access to devices: Smartphones more prevalent
CountryDigitalEcosystemDiagnosticReport. www.sdpi.org|www.sdpi.tv
Source: PTA 2024

18. Rising Mobile Usage Among Women but Still High Disparities
CountryDigitalEcosystemDiagnosticReport. www.sdpi.org|www.sdpi.tv
Mobile Ownership Gender Gap (2023)Mobile BB Subscriptions Gender Gap (2023)

19. Source:PBS
Urban vs. Rural Internet Access & Divide

20. DigitalInfrastructure:Top 3 Opportunities
1. Mobile exceeds fixed teledensity–opportunity for mobile 1
st
approach (m-gov, new products/ services)
2. Rapidly growing revenues & demand for broadband: 2019-2023 Subscriptions doubled,
3. Untapped domestic market @ 79% & young demographic of prospective digital natives –new services
Source: PTA 2024

21. DigitalInfrastructure:Top 5 KeyChallenges
1. Optic Fiber Network & Right of Way Limitations curb reliableInternet coverage for innovation & economic growth.
2. Unfavorable taxation: High federal/ provincial taxes & inconsistent tax policies hinder DPI development.
3. Inefficient Spectrum Allocation & Pricing limit quality of connectivity & competitive coverage –e.g. 5G.
4. Affordability asymmetries exacerbate digital divides, especially for women and marginalized groups.
5. Decline in Telecom Revenues & Foreign Investments –due to challenging business environment, incentives.

22. Digital Infrastructure: 10+ Recommendations
Predictable Policies for
competitive & inclusive
DPI
Ensure rules, regulations
support innovation and
competition.
Optimize Right of Way
(RoW) Fees
Rationalize Taxation
on Digital
Infrastructure
Spectrum Pricing
Reform
•Introduce a flat country-
wide optimal RoWfee per
meter.
•Allow for a predictable
rise over a longer period
to facilitate infrastructure
expansion
•Fix future spectrum
floor prices through
policy dialogue.
•De-link pricing from
USD to ensure
affordability &
competitiveness.
•Rationalize direct and
indirect digital
infrastructure taxes at
competitive tax rates
vis-à-vis other
countries, fixed for min
of 10 years.

23. Digital Infrastructure: 10+ Recommendations
Provincial Demand
Generation
Catalytic Investments
in Digital
Infrastructure
Prioritize early-stage
catalytic investments in
digital infrastructure
projects.
Signal focus on the digital
economy despite long
payback periods.
Reform of Universal
Service Fund (USF)
Reform USF to attract investors
in unserved areas.
Fund Telecom Infrastructure
Providers (TIPs) vs Service
Providers.
Support demand generation
projects like Smart Village and
Smartphone initiatives.
Expansion of Optic
FibreConnectivity
CountryDigitalEcosystemDiagnosticReportwww.sdpi.org|www.sdpi.tv
•Use USF investments
to lay optic fibresup
to all Union Councils.
•Extend connectivity
to rural areas to
bridge the digital
divide.
•Provinces to subscribe to
fiber BB for schools and
hospitals.
•Digitize education &
health to encourage ISP
to invest in connecting
businesses and
households.

24. Digital Infrastructure: 10+ Recommendations
Incentives for Local
Smartphone Manufacturing
Legal Framework for PPPs Expand Equitable Internet
Access and Device Ownership
•Encourage (FDI) through
strategic incentives.
•Provide a 3% R&D
allowance on exports
of locally produced
smartphones.
•Create a robust regulatory
framework for (PPPs).
•Ensure "open access"
digital infrastructure to all
service providers without
discrimination.
•Design PPP programs with
local & global partners.
•Provide low-cost or installment-
based smartphone options to
increase citizen, especially
women's, internet access and
device ownership.

25. Digital
Government

26. Digital Government: Online Services Index
Source: 2022 United Nations E-GovernmentDevelopment Index
Above Global average
Above Sub-subregional average
Below Regional average

27. Digital Government: Online Services Index
Source: 2022 United Nations E-GovernmentDevelopment Index

28. DigitalGovernment:PositiveDevelopments
Accelerating Policy Agenda on AI, Cloud, Data Protection, Cybersecurity
Many successful initiatives & precedents
Provinces eager, see value in digitizationbut need resources, alignment
CNIC eIDin place but needs: scale, wider integration, user centricity.

29. Ongoing Federal & Provincial Government Digital Initiatives
▪PSW
▪National Command & OPS
Center
▪PM Citizen Portal
•Land Records Mgt.(LRMIS)
▪Tax AsaanApp
▪Socio-Economic Registry NSER
Federal
▪E-Stamping
•School Information System
•Disease Surveillance
System
•e-Challan & Driving
License Issuance
Management System
Punjab
▪Digital Learning Platform
•e-Pay Sindh
•e-Services Sindh
•e-Registration for
“Registered Sale Deeds”
Sindh
▪KP Portals(Citizen, Employee,
Internship, Inspection, Corona
Ihteyat, Scholarship Portal)
•Human Resource Management
System
•File Tracking System
•KP Open Government Data
Portal
Khyber
Pakhtunkhwa
▪BalochistanPublic
Procurement Regulatory
Authority Digital Platform
•Governor BalochistanIT
Initiative
Balochistan
•AJK Portal
•E-Facilitation Center AJK
•AJK Police
Azad Jammu &
Kashmir
•Gilgit Baltistan Health
Department's
Telemedicine Services
•Nano Influencer Academy
Gilgit-Baltistan

30. DigitalGovernment:KeyFindings
Government data protection inchoate: draft legislation pending, WoG, WoS.
Unclear status about digital adoption & digital competency, Skills in public sector.
Cybersecurity seen as a state security matter:low whole of gov/ society awareness.

31. DigitalGovernment:Top 5 Challenges
1. Digital policies lack coherence & Implementation records: Action Plans, M&E, clear budgets.
2. Weak vertical & horizontal coordination : Provinces, districts, sub-districslack digital strategies.
3. Suboptimal & non-integrated national, sub-national PFM systemslimit revenue collection.
4. Weak Data Management, Analytics & Reuse: data sharing standards, guidelines, SOPs.
5. E-servicesgrowing but most public services are paper-based,no service catalogues, low BPR,
status audits.

32. How to future proof Pakistan`s whole of government digital
approach?

33. Digital Government: 12+ Recommendations
Update of Digital Pakistan
Policy –aim long-term
Provincial Digital
Transformation Roadmaps
Digitization of Public
Services
Strategic Allocation of
Development Funds
•Conduct baselines
•Develop & implement
provincial Digital
Transformation Road
Maps aligned with the
national vision.
•Audit the Digital Pakistan
Policy 2018: completed
milestones vs. gaps.
•Participatory Update
•Integrate policy sandboxing
mechanism.
•Prioritization of high-impact,
high-demand, and high-
volume public services (e.g.,
tax/revenue admin.,
pensions, social payments,
health, education, justice).
•Enable mobile solutions.
•Allocate public
development funds
with changing needs
of the digital sector.

34. Digital Government: 12+ Recommendations
Data Governance Framework Expand eID`sIntegration with
other government institutions
E-Government Fund (eGF)
•Establish a data governance
framework defining principles,
standards, policies and
procedures for data sharing,
quality, security, privacy, and
ethics.
•Create a data portal for data
discovery, access, reuse.
•Facilitate integration of NADRA's
database with other government
systems –e.g. social payments
and loan approvals.
•Use machine learning and AI to
enhance efficiency in credit
scoring and risk assessments.
•Create an e-government fund &
PPPs to mobilize resources.
•Provide financing & incentives for
digital government platform
projects, PPPs, digital inclusion,
and literacy initiatives.

35. Digital Government: 12+ Recommendations
Establish Federal Lead Agency
for Digital Transformation
Launch Modular E-Learning
Platform for Public Servants &
Digital competency Assessments
Adopt & Rollout Holistic
Approach to Cyber
Resilience & Data
Protection
Launch AI Regulatory Sandbox Implement a Data Exchange
Layer & Pakistan Digital Stack.

36. Pillar 3: Digital
Economy
This Photoby
Unknown Author
is licensed under
CC BY

37. Dynamics: Pakistan’s Digital Economy 2023-24

38. Dynamic DigitalEconomy:KeyFindings
Digital Payments: Despite rise in mobile banking -only 17.7% of Pakistanis use digital payments.
Pakistan 8th globally in Cryptocurrency adoption: used as value holding asset against currency devaluation.
$10 billion in E-Commerce Spending in 2023 –lower than Bangladesh ($16 bil.) due to low digital payment
acceptance, financial & digital literacy.
18,000 technology or digital businesses in over 130 cities and towns host approximately.
Market Capitalization: Tech companies = only 3.3% of Pakistan Stock Exchange's market capitalization

39. Dynamic DigitalEconomy :KeyFindings
Only 4.3% of local Bank Loans go to SMEs and 3,6% to Agriculture.
Third-largest Gig/Freelancing Workforce in the global gig/freelancing industry.
Venture Capital Funding: Valued at $366 million in 2021, dropping to 18% in subsequent years due to high USD &
unstable market conditions.
Competitive Mobile Apps Game Development Revenues: about $500 million, high future growth potential
Lack of Sustainable Policy Framework & Action Plan

40. Dynamic DigitalEconomy:KeyFindings
High Corporate & Payroll Taxes in the region discourage business scaling and tax compliance.
Trade surplus of more than 85% in ICT and Telecom exports.
Low Presence of Multinational Captive IT Companies due to unfavorable taxation and foreign exchange policies.
STEM & ICT Graduates: In 2023, 27% ICT graduates –43 000. Low general higher education enrollment –12%.
Lowest Point of Sales Systems: Only 109,000 POS systems deployed
SMEs Digitization Low due to to concerns about unpredictable policies and taxes.

41. How to Sustain & Scale Pakistan`s Inclusive Economic Growth ?

42. Digital Economy: 23+ Recommendations
CountryDigitalEcosystemDiagnosticReport
www.sdpi.org|www.sdpi.tv
Uniform GST
Rate
Implement a
uniform 5% GST
rate for all digital
transactions.
Provide an input
tax credit for 5
years.
Corporate Tax
Cuts for SMEs
Reduce
corporate
income tax rates
and business
costs by 10% for
10 years.
Conditional on
business
registration and
digital platform
usage.
Simplified
Taxation for IT
Exports
Simplify taxation
and foreign
exchange
regimes to
attract global
captive offices.
Cap Payroll
Taxation for IT
Exporting
Companies
Cap payroll tax
to 15% of
income.
Offer tax credits
for hiring local
talent.
Tax Credits for
Women-Led
Businesses
Approve tax
credits for
women-led
businesses in
digital trade or IT
services.
Reimagined
Digital
Economy
Regulation
Establish single-
window
regulation for
internet
businesses.
Ensure flexibility,
responsiveness,
and support for
digital and ICT
projects.

43. Digital Economy: 23+ Recommendations
Tech IPO Initiative
Support tech
companies in
getting listed on the
Pakistan Stock
Exchange.
Tech Financing
Window
Create a dedicated
tech financing
window at the
State Bank of
Pakistan.
Provide low-
interest loans and
guarantees to tech
companies.
Commercial Bank
Loan Allocation
Mandate banks to
allocate at least
15% of loan
portfolios to SMEs,
with a focus on
digital and ICT
businesses.
Tailored
Financing for
Women-Led Tech
Companies
Provide tailored
financing programs
for women-led tech
companies and
businesses in
digital trade or IT
services.
High-Impact
Economic Sector
Digital
Transformation
Prioritize sectors
like agriculture,
transport, logistics,
and manufacturing
for digital
transformation.

44. Digital Economy: 23+ Recommendations
Public-Private
Sector Cooperation
for Workforce
Upskilling
Cooperate to provide
digital readiness
skills training using
innovative online
platforms.
Digital Literacy
Programs for
MSMEs and SMEs
Design programs on
digital literacy,
marketing, e-
commerce, and
regulatory
compliance for
MSMEs and SMEs.
Digital
Entrepreneurship
Programs for
Women
Create programs on
digital
entrepreneurship,
business skills,
mentorship, and
networking for young
women and women-
led businesses.
Modular Digital
Education
Programs
Implement digital
education programs
in schools for basic
digital skills
proficiency.
Build Consumer
Trust
Run awareness
programs on e-
commerce, online
safety, cybersecurity,
.

45. Digital Economy: 23+ Recommendations
Stackable ICT
Degree Programs
Introduce 2-year + 2-
year stackable
associate graduate
degrees in ICT skills.
Specialized
Economic Zones
(STZs)
Engage stakeholders
to develop STZs with
tailored incentives for
FDI.
Focus on smart
specializations and
strong RDI.
Specialized
Commercial Courts
Establish courts for
expeditious corporate
dispute resolution.
Capital Gains Tax
Exemption for Tech
Startups
Announce a 20-year
capital gain tax
exemption for tech
startup investments.
Exempt VC funding
and private
investments from
capital gains tax for 7
years from the
deployment date.
Bank Policies for IT
Business Financing
State Bank to create
policies for banks to
finance IT businesses.
SECP to work with
P@SHA to plan
annual roadmaps for
listing tech companies
on the Pakistan Stock
Exchange.

46. Pillar 4:
Digital Society
CountryDigitalEcosystemDiagnosticReport
www.sdpi.org|www.sdpi.tv

47. 0
10
20
30
40
50
60
70
80
90
Availability Affordability Relevance Readiness Overall
Inclusive Internet Index
PakistanIndiaBangladesh Vietnam
Digital Society: Regional Comparison
CountryDigitalEcosystemDiagnosticReport
www.sdpi.org|www.sdpi.tv
Source: Inclusive Internet Index 2022, Economist

48. Digital Society: Growing Social Media Usage
Source: DatareportalReport 2023, DataReportal

49. DigitalSociety:KeyFindings
Socio-Cultural Barriers for Women and Minorities, including online harassment
Poor Connectivity Qualitynegatively impacts access to education and business opportunities
Limited interactive Civic Tech Usage
Social Innovation Funds aregrowing but limited in number.
Limited inclusion of Academia and Civil Society in

50. DigitalSociety:Findings
Digital disparities due to geography, costs, social norms, and digital literacy.
Digital Gender Divide: Women disadvantaged in phone ownership and access fueled by socio-cultural norms.
Educational Gaps: Disconnect between labourforce digital competency and market needs.
Public awareness of digital threats and data protection is low due to limited literacy and media coverage.
Internet Shutdowns cause significant financial and economic impacts.
Digital Inclusion Barriers: Language, & Connectivity

51. EmergingDigital Society: +10 Recommendations
Improved Data
Collection and Analytics
Basic Digital & Financial
Literacy
Digital Competency
Promotion
Provincial Social
Innovation Funds
•Enhance data collection &
analytics to better target
digital inclusion programs.
•Partner with academia and
civil society for improved
program efficacy.
•Promote digital
competency in local
content creation, problem-
solving, data protection,
and cyber resiliency.
•Integrate a market-
responsive digital skills
approach at all education
levels.
•Advance basic digital
and financial literacy to
boost inclusive
connectivity and
affordability.
•Implement local content
and literacy programs
via PPPs for vulnerable
social segments.
•Establish PPP-driven social
innovation funds to
incentivize local solutions.
•Focus on content
development for
marginalized groups, rural
dwellers, women, the
elderly, and the physically
disabled.

52. EmergingDigital Society: +10 Recommendations
Upskilling &
Empowerment
Programs
Set up programs to upskill and
empower digital multipliers,
including teachers, CSOs, and
local media.
Financing Schemes for
CSOs and Academia
Digital Gender Inclusion
Strategy
Leveraging
Partnerships
Partner with the private
sector, academia, civil society,
and international partners for
broader impact.
•Ensure that budget for PTA–
UNESCO strategy is gender-
responsive.
•Implement flagship programs
supporting access to devices,
women-friendly digital
content, entrepreneurship,
digital finance, e-commerce,
employment, and maternal
health.
•Provide financing schemes
to enhance the role of CSOs
and academia in analytics,
policy making, public
education, digital rights.
•Focus on topics such as
data protection,
misinformation, cyber
hygiene, and child
protection.

53. EmergingDigital Society: Recommendations
Curricula for Digital Age &
Innovation
Transparent Criteria for Internet
Shutdowns
Government to publish clear criteria for
internet shutdowns to minimize negative
economic impacts and preserve internet
freedoms.
•Mainstream smart, market-
responsive digital specialization
programs in TVET and higher
education.
•Focus areas include STEM, data
science, AI, deep tech, digital
entrepreneurship, legal and ethics
(data protection, AI), cybersecurity,
biotech, biomed, greentech, and
spacetech.

54. THANK YOU !!!