Why Pakistan Lack Hi-Tech Entrepreneurship?

August 28, 2006 at 10:30 am | Posted in Arsalan's Dawn Article | Leave a comment

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Hi-tech entrepreneurial companies are those companies which are at the cutting edge of technology and innovation. These companies are started with very less capital and yields extremely high rate of returns. These are the companies which are driving the world economies at the fore ends. But unfortunately due to certain mentioned reasons,
Pakistan couldn’t start and breed such companies.
 IT industry is one of the examples of the hi-tech industry with high returns. Hi tech industry is developed by hi-tech entrepreneurs who are having vision on latest market trends and have knowledge on future upcoming technologies. In current years hi-tech entrepreneurship has became primary focus of concern for developed countries. The country’s trade and industrial bodies along with financial institutions are aligning their visions and plans to cope with such entrepreneurship. These companies are started with peanuts investments and now thriving as the world largest companies. The main factors behind the success are the hi-tech talent combined with hi-risk investors.  

This talent is known as hi-tech entrepreneurs which are the driving force behind such industry. They are intelligent, innovative, visionary and completely updated with latest market trends. Banks, venture capitalists and business angles pound money in their pockets so that they could go ahead in their mission. The government also provides infrastructure and support so that they could thrive well.  Established conventional industries looses competitive advantage with time, and soon gets to maturity stage where profits are shrinking day by day and enormous capital is required to run the business with less returns. In case of hi-tech startups, it is confidently assumed that in short span of time, the company will be giving high returns. Such high return rates could never be imagined even in big established MNCs. That’s why in developed countries government and financing bodies are taking keen interest in investing in such hi-tech startups. All governmental support policies in form of financing, subsidies, etc are totally favored to these hi-tech startups. Governments consider these as the most revenue generating in future, which is true. This is the reasons that in these developed countries, day by day new hi-tech companies are coming into picture and showing outclass corporate results. 

Assuming that there is hi-tech talent in
Pakistan, then following will be the main issues related to hi-tech entrepreneurship:
 The policies of trade and industry are not favorable to startups. From registering a hi-tech company, to running its day to day business, coping with tax regulations and different governmental authorities is extremely difficult and complex. From government side, there are lot of formalities, unnecessary delays in procedures, confusions in regulations, lack of institutional operational policies and corruption. In this case nothing goes planned and there are lot of surprise and unavoidable hurdles in the business timeline which eats up resources of time and money. Hi-tech startup usually comprises highly time sensitive scenarios.  For a hi-tech startup, there should be the availability of market which is ready to pay the price of the hi-tech product. Usually such market exists in western countries. Access to those markets for Pakistani companies is difficult due to the lack of governmental agreements and preferences. With government busy in signing trade agreements with under developed and poor countries for basic raw commodities, the availability of markets for Pakistani hi-tech entrepreneurial companies is a dream.  

Following could be an unusual comparison of traditional trade versus hi-tech entrepreneurial trade with developed countries: – Selling mangoes to
Tajikistan versus selling branded canned fruits to
Scandinavia.
– Selling rice to
Zimbabwe versus selling automotive software to
France.
– Selling kinnos to
Bangladesh versus selling BPO services to telecom firms in
Germany.
 
Innovation and technology protection is also one of the issue being faced by hi- tech entrepreneurs. They have two options to protect their complimentary assets. Either they could opt to disclose publicly their technology or innovation and protect through trademarks, copyright or patents; or they could protect their technology by secrecy.  In both cases it is difficult in
Pakistan. There are no proper IPR laws for Pakistani entrepreneurs. The established IPO body by the government will initially be offering services to foreign companies and MNCs. It will take decades for IPO to protect local intellectual rights. They would have huge operational constrains in this matter.
 Startups require capital. For money, usually a high tech entrepreneur turns to several options for money. Amongst them are business angels, venture capitalists, investment funds and banks. These entities invest money keeping in view of the proposed business plan and amount of risk with the business. Hi-tech startups are associated with high risks. That’s the reason that the return is also high. Unfortunately Pakistani banks and other financial institutions fear risks and prefer to invest or disinvest in liquid markets where they find easy returns, no matter how less. With this fearing of risk by financing bodies, high-tech entrepreneurs find no money option, both from debt and equity financing sources.   Other option to Hi-tech entrepreneurs is asking for financing through 3Fs (friends, family and fools). There could be financing options for the entrepreneur in this, but such huge money in
Pakistan is usually in the black market. The last option is own money which is usually not sufficient to start a hi-tech company. 
 Under these circumstances, is very difficult for a hi-tech enterprise to start and thrive in
Pakistan. That is the reason to-date
Pakistan couldn’t make and breed world class hi-tech entrepreneurial companies unlike her neighbors.

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