The govt and digital innovation

A quiet social transformation is underway with an increasing number of people embracing innovative solutions to everyday problems.

Ordering Careem to commute, getting old books delivered using Kitabain.com, ordering food using Apps, hiring handymen to fix regular wear and tear at home and buying and selling stuff from the comfort of one’s home are fast becoming the new normal for many young technology savvy people. It saves them a lot of hassle and often proves to be more cost effective than the traditional way of doing things.

The ministry of technology, it seems, has succeeded in putting in place an accelerated digitisation ecosystem. The ease of access to information using smart phones has opened up space for a new generation of smart companies, all set to capitalise on the business possibilities in an evolving environment.


“The government has given a free hand to IT firms. The logic of non-intervention is to attract investment and to grow our IT industry and its exports”


It is not surprising, therefore, to find young urbanites across all social classes, downloading Apps of digital companies that cater to their lifestyle aspirations.

Authentic data is not available but apparently most new digitised outfits are service providers and mediating platforms between customers and companies/individuals for a fee. The firms’ active in transport, food delivery, shopping — from greens, grocery, electronics, cars, properties to jobs — are gaining popularity and expanding business, with some posting three digit growth rates from a low base, over the past two years.

Careem, Uber, Olx, Rozee.pk, Kaymu, Eatoye, Food Panda, Kitabain, Daraz, and many others have been active and growing at a fast pace. Little is known about their actual size, rate of profitability, business model, management framework/practices, strength of employees or the pricing structure.

Key federal economic ministries and departments were approached in Islamabad to shed light on the phenomenon but most were clueless.

Asim Shahryar Husain, managing director, Pakistan Software Export Board (PSEB) mentioned that more than 1,200 IT companies are registered with the PSEB at present. However, the total number of IT companies is more than 2,000.

“We are not a regulator. It is not our mandate to monitor or discipline IT companies. We facilitate our members through our different industry support programmes but registration is voluntary.” he said.

“All IT companies are supposed to submit ‘R’ forms to the State Bank to report their export proceeds. Since summer of 2014, export proceeds of IT firms have grown from $370m to $560m last year and we expect it to cross at least $650m by the end of the current fiscal year”, he shared.

“The government has given a free hand to IT firms. The logic for the policy of non-intervention is to attract investment and to grow our IT industry and its exports. Currently, the market is not sufficiently developed for regulations”, he said.

The possibility of identifying a new set of profit-making entities to draw revenue from does excite the FBR higher-ups who do not pretend to know the sector.

“Please send a list of profitable digitised companies so that we can evaluate resource generation potential. All business entities, irrespective of their mode of operation, are obligated to comply with taxation laws”, commented Rehmatullah Khan Wazir, member, Inland Revenue Board.

As many digitised companies are service providers, he observed: “The responsibility of collecting sales tax on services rests with provinces but, yes, we are entitled to receive corporate income tax from successful businesses”.

Responding to a written query by Dawn regarding the status of some known digitised firms, the Security and Exchange Commission of Pakistan mailed the following: “The Commission is responsible to oversee the companies which are registered with it under the Companies Ordinance, 1984. The following four companies out of list mailed by Dawn are registered with the Commission.

As per provisions of the Companies Ordinance, 1984, the below mentioned companies except M/s. Zameen Media (Pvt.) Limited are not required to file their annual accounts with the Commission. As far as taxes are concerned, the matter relates to the Federal Board of Revenue (FBR).

The registered companies include M/s. Careem Networks Pakistan (Pvt.) Limited (Careem), M/s. Zameen Media (Pvt.) Limited (Zameen.com), M/s. Eatoye (Pvt.) Limited (Eatoye), M/s. Sukoon Handyman and Errand Services (Pvt.) Limited (Sukoon)”, SECP mail said.

The PSEB confirmed that Careem, Uber, Sukoon, Daraz, Eatoye, Foodpanda have also listed with the board.

Arsalan Raja, an advocate, was not happy with the situation. He mailed a copy of a petition to Dawn against one digitised firm operating in the transport sector. Speaking over the phone, he mocked the idea of letting profit-making businesses operate outside the legal framework intentionally.

“If the legal system in Pakistan hurts businesses it should be changed but it is both unfair and unethical to enforce the law selectively”, he said.

Elaborating on his point he asked: “Who will be responsible if an App user gets cheated? Who will take disciplinary action if no regulator is responsible for them?”

By moving the court in his capacity as a concerned citizen he intends to bring these firms out of shadows.

Published in Dawn, Business & Finance weekly, January 30th, 2017

Source: Dawn News

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