Pakistan ICT Industry

Telecommunication: Economic Survey of Pakistan 2007-08

2008-03-13T05:23:00.000-07:00

II. TELECOM SECTOR
The Government, through its sound policies, has created a business friendly environment in the telecommunication sector of Pakistan. Since effective deregulation in 2003-04, the Government has announced various business centric policies, which take into account market demands and challenges, are open and consistent, and have created an encouraging environment for healthy business activities in the telecom sector. Competition has now been introduced in each segment of the telecom sector including fixed line, mobile and other value added telecom services. As a result, an unprecedented growth has been witnessed in almost every segment and the cellular phone sector in particular. Total teledensity in the country has reached 52.94% (as of end December 2007 Table 1)

Table 1 Teledensities of Regional Countries (%)

2002-03
2003-04
2004-05
2005-06
2006-07
Pakistan
4.3
6.3
11.9
26.2
52.9
Sri Lanka
12.2
16.6
23.4
29.0
37.0
India
7.1
8.9
11.5
12.8
15.4
Bangladesh
1.6
2.0
4.5
9.0
15.0
Nepal
1.8
2.0
3.0
3.5
6.5
Teledensity includes fixed, WLL and mobile

As a result of strong growth in the sector the revenues of the telecom companies reached Rs. 194 billion during 2005-06 and registered revenues of Rs. 235 billion during 2006-07. Consequently, the contribution of telecom sector in the government’s exchequer is 100 billion during 2006-07. The success of the telecom sector in Pakistan is now globally recognized and it has emerged as a role model for other emerging telecom markets.

i). Implementation of Cabinet Approved Telecom Policies:
The Federal Cabinet approved the following three telecom policies (formulated by Ministry of IT) for the development of telecom sector:
o Deregulation Policy for the Telecommunication Sector, July 2003
o Mobile Cellular Policy, January 2004
o Broadband Policy, December 2004
Telecom wing has been actively engaged in activities centered towards implementation of these policies and has produced the following results.

a). Implementation of Deregulation Policy for the Telecommunication Sector and its Impact:
The Deregulation Policy for the Telecommunication Sector is prepared with the key objectives to improve infrastructure development, increase capital investments and to harness local entrepreneurship in the sector. It is focused to effectively increase quality and choice of services for businesses and consumers, at affordable prices. It also aims to protect national security interests, extend reach of telecommunications services to under-served areas of the country; and promote fair competition amongst licensees.

In view of the above, Ministry of Information Technology is actively facilitating telecom operators to roll out and start businesses in a befitting manner. For this purpose, Government of Pakistan has granted 14 Long Distance International (LDI) and about 38 Local Loop (LL) licenses. Out of these, thirteen LDIs have started their operations and have established more than 94 gateways across the country. LDIs have increased their Point of Presence (PoP) to 127 locations through out the length and breadth of the country. Similarly 12 out of 38 LL companies have become operational while others are actively planning their rollout. Due to the government’s supportive measures, more and more operators are rolling out telecom networks in the country and such measures are being witnessed to produce very encouraging results from operators in terms of increased network accessibility, coverage and quality of service. On the consumer side, the results include reduced call rates, increased service alternatives and improved customer support.

Wireless local loop (WLL) services were introduced in Pakistan in 2004. For this purpose the Authority auctioned frequency for commercial operations of WLL services and issued to 17 Local Loop Licensed companies, out of which 5 WLL companies are currently fully operational. There has been considerable growth in the sector over the last 2, 3 years and currently WLL subscribers in Pakistan have crossed over 2.2 million subscriber base.

b). Implementation of Mobile Cellular Policy and its Impact:
Mobile communications is a vital part of the telecom sector. Liberal government policies in this sector have allowed for enormous mobile industry growth in the country.

The number of Cellular Mobile Subscribers has increased over 65.65 million users at the end of July, 2007 as compared to 34.5 million in 2006. Net increase in Cellular Mobile subscribers during the year 2004-05 has been around 7.7 million, about 21.8 million during the year 2005-06 and approximately 27.8 million during 2006-07. Since, the total cellular subscribers have crossed the figure of 65 million in July 07. Moreover, by the end of December 2007 the total number of cellular subscribers has crossed 76 million users bringing the total cellular penetration of approximately 48.61% in the country.

c). Implementation of Broadband Policy and its Impact:
Another important policy formulated by the Ministry of Information Technology is the Broadband Policy for Pakistan. This policy was prepared and approved in Dec.2004 by the Government of Pakistan. The policy is aimed to support the proliferation of IT and IT enabled services in the country. The Ministry of Information Technology is facilitating penetration of Broadband/ICT services throughout the country though active measures. Rates of international bandwidth have been reduced tremendously to facilitate the broadband service users. MoIT, PTA and Industry Stakeholders have worked jointly to come up with a comprehensive licensing framework of broadband service providers. Simplified procedures and harmonization of the licensing framework concerning new ISPs/DNOPs (Internet Service Providers/Data Network Operators) have contributed in the proliferation of broadband service in Pakistan

ii). Telecom Sector Growth
Telecom sector has attracted $654.30 million Foreign Direct Investment that has been 32.64 percent of the total FDI injected into Pakistan’s economy during the first half of current fiscal year. The dramatic growth in the telecom sector has been supported by prudent government policies. Total number of mobile subscribers in Pakistan has crossed 76 million by end December 2007, whereby mobile density has hit 48.61%, far surpassing the fixed line teledensity at 4.33 % with total working connections of 5.2 million. The wireless users have increased to 2.2 million in 2007 from 1.1 million in 2006 against 4.9 million fixed line phones. Similarly, value added services, such as payphones and Internet usage are also on the rise. There are 387,490 PCOs working across Pakistan, more than 6.5 million registered Internet subscribers and estimated 12 million Internet users. Internet Dialup subscribers are 3.5 million, whereas estimated DSL subscribers are 0.7 million at Dec 2007.

(Table – 2) Teledensity of Pakistan (%)
Year
Fixed Line Density
WLL Density
Total Fixed Teledensity
Mobile Teledensity
2000
2.18

2.18
0.22
2001
2.28

2.28
0.52
2002
2.49

2.49
1.16
2003
2.7

2.7
1.61
2004
2.95

2.95
3.29
2005
3.43
0.17
3.6
8.3
2006
3.39
0.66
4.05
22.21
Dec-07
2.99<
1.34
4.33
48.61
Jan-08
3.06
1.39
4.45
48.96

a). Cellular Mobile
The cellular operators have been pumping money into the sector to expand network and exploit its full potential. They have been adding subscribers in huge numbers to their network every month. The growing competition in the vibrant cellular market of Pakistan has compelled the operators to offer quality services at competitive prices. All of the GSM operators namely Mobilink, Warid, Telenore, Ufone and CMPak performed well during the last year exhibiting tremendous growth in their subscriber base and provided the market with new, innovative and value added services. Added competition from Telenor and Warid has provided real momentum for the growth of Pakistani mobile market. These two companies have given an impetus in the industry for lower tariffs, expanded networks, customized packages and high tech services. During the year, mobile companies have continued to expand their network and subscribers exponentially. Today, mobile segment of telecom sector is considered to be the most thriving one. On average, approximately 2.7 million subscribers have been added on cellular mobile networks each month in Pakistan. This is an exemplary growth in relation to the population of any country in Asian region.
(Fig – 1)

Fig – 1: Cellular Mobile Subscribers
The entry of Warid and Telenor in 2005 resulted in significant changes in the market; one of which was market structure with respect to subscribers’ share. These two companies started attracting customers, which reduced the market share of the dominant player, Mobilink from 64 percent in June 2004 to 40 percent in December 2007. The two companies now have a combined share of over 32 percent (As of March 2007) of the market share which is very healthy development with regard to competition and maturity in the market. Herfindahl Index, also known as Herfindahl-Hirschman Index (HHI, is a measure of the size of the firms in relationship to the industry an indicator to the amount of competition among them) a widely used measure of the industry concentration, also shows an improvement in Pakistan’s mobile market competition, particularly during the last one year (Fig – 2 & Fig 3). Socio-economic impact of mobile phone is also detailed in box 1.
Fig – 2 Cellular Market Share (June 07)
Fig – 3 Cellular Market Share (December 07)

Box – 1
Socio – Economic Impact of Mobile Phone Growth
Pakistan Telecommunication Authority conducted an independent study to assess the socioeconomic impact of mobile growth in Pakistan. A survey of 1,269 mobile phone users was conducted during March 2007 in all four provinces AJK and NAs. The study found that the use of mobile has created socio-economic awareness among the users changing their life style, in improvement of their business and related activities, saving time on inter-city trips and local visits and ultimately in saving money and increase in their sales and income. The use of mobile phone on average made 35 percent increase in the sales of individual businessmen included in the survey.

Use of mobile has also increased the access to medical, financial and other services. According to the survey results, more than 52 percent respondents reported that the use of mobile has improved their access to doctors and health personnel. It has also improved their family cohesion and elevated women’s role and say in family and society.

Employment Generation
The study also analyzed the business outlook and the value chain model of the mobile sector in the country. It estimated current employment level of 354,042 employees engaged in the telecom sector at various levels of value chain including employment at Telecom Companies, vendors, tower businesses and cell phone shops. It was projected that 58,009 direct and indirect employment opportunities would be created in 2007-08.

b). Fixed Line Services
In the Long-distance and International (LDI) segment, 13 companies are operational out of the total 14 LDI licensees. PTA also awarded licenses to 38 Fixed Local Loop (FLL) companies for their operations in various telecom regions. So far, 4 companies have launched their services, with limited network coverage in some cities of Punjab and Sindh. Few other companies like Nayatel, Multinet Broadband and Stanlay are at their rollout stage; however, their coverage is limited with low capacity. There are 4.9 million fixed line subscribers in Dec 07 and 98% of whom constitute the subscriber base of the incumbent operator, PTCL (Fig-4)

Fig – 4 Fixed Line Subscribers

c). Wireless Local Loop
WLL technology was introduced in Pakistan in 2004 with the objective to bridge the digital divide between the rural and urban areas as the deployment of WLL services is much easier than the fixed line. The total WLL subscribers have reached 2.2 million which are now 30 percent of the fixed line subscribers. WLL density has also increased to 1.06 percent. Currently, 5 WLL operators are providing their services in the country. The coverage extended by PTCL for WLL services has reached over 1,080 cities/towns of Pakistan.
(Fig-5)
Fig – 5 WLL Subscribers
iii). Sector Accomplishment
a). FDI in Telecom Sector
The total FDI inflow was $2.14 billion during first half of current fiscal year and telecom sector stood the major contributor with $654.3 million. Telecom Economic Indicators of the first two quarters revealed total inflow of $962.5 million FDI in July-September 2007 and $1051.10 million in October-December 2007. Whereas the telecom sector contributed $363.9 million in the first quarter, July-September 2007 and $290.4 second quarter, October-December 2007. Thus contribution of telecom sector to the total FDI was 32.64 percent in the first half of current fiscal year. In the last 2-3 years telecom sector has attracted record inflows of FDI. During 2006-07, telecom sector received over US$ 1824.3 million FDI and emerged as the single largest sector attracting FDI. In 2005-06, telecom sector received US$1905.1 million FDI and emerged as main sector of the economy with 54.11 % share in the total FDI. (Fig-6).
Fig – 6 FDI in Telecom Sector
b). Contribution to National Exchequer
Telecom sector is a major contributor to government revenue. During 2005-06 total revenue collected by the government in the form of taxes and PTA deposits was more than Rs. 77 billion. The government collected total GST/CED of Rs. 8.9 billion in 2001-02 on telecom services, which increased to Rs. 36.30 billion by 2006-07. Total GoP receipts from telecom sector through taxes, deposits and other sources amounted to Rs. 100 billion in 2006-07. It is expected that the contribution of telecom sector in total GST/CED collected by CBR will grow in the coming years. The government also collects activation tax on new mobile connections at the rate of Rs. 500.

iv). Reduction in Telecom Services Tariff
Significant reduction has been witnessed in the tariffs of almost all the telecom services over the last two to three years. The national and international long distance tariffs which were Rs. 34 and Rs. 70 per minute in 1996 respectively, have reduced significantly to as low as Rs. 0.67 and Rs. 0.79 per minute, respectively through calling cards. The incumbent operator PTCL has also reduced its NWD and international tariff drastically. In addition, the new local loop operators are also offering zero line rental packages and free local call packages to telecom subscribers. Similarly tariffs of mobile services have also reduced. The minimum prepaid on-net tariffs which were Rs. 5.75 per minute in 2003-04 have reduced to Rs. 1.50 per minute. The international long distance tariffs from cellular mobile have also reduced and are as low as Rs. 1.95 per minute. The cellular mobile operators are also offering friends and family packages in which the tariff is as low as Rs. 0.90 per minute. The cellular mobile operators are offing per second, per 30 second and per minute billing to their subscribers.

v). International Recognition of Telecom Policies
a). Establishment of International Coordination Unit:
To facilitate international coordination and liaison, MoIT has established the International Coordination Unit in April 2007. The unit is actively involved in coordination and liaison activities with international organizations like ITU, APT, CTO and many others. The goal of the unit is to ensure that Pakistan stays ahead in international collaboration in telecom sector while actively participating in international forums for ICT and Telecommunications matters.

MoIT benefited itself and telecom sector including PTCL, PTA, NTC, SCO, FAB from various training opportunities offered by ITU, APT and CTO. These trainings have helped enhance the HR profiles, and expertise available in telecom sector within the country. MoIT also participated in ITU Council Sessions, WTDC, WRC, various APT meetings and have actively contributed in ITU events like WSIS, World Telecom Development Conferences (WTDC). One of the Pakistan proposals on disaster relief assistance was given a global status in World Telecommunication Conference in Doha in 2006. Pakistan also contested for ITU Council and Radio Regulation Board seats during ITU Plenipotentiary Conference in November 2006 and through active efforts of Ministry of IT, it is now an active member of these esteemed forums.

b). ITU Asia Pacific Center of Excellence ((PTA node for Policy and Regulations) :
In the first stakeholders meeting of the International Telecommunications Union Asian-Pacific Region Center of Excellence (ITU ASP CoE) in Bangkok, Thailand on the 19th to 20th October 2006, Pakistan was selected and given the mandate to become the CoE node in the Asia Pacific Region for Policy & Regulations. Accordingly Ministry of Information Technology, MoIT (IT&T Division) assigned the task to PTA for the establishment of ITU Regional Center of Excellence (CoE) Node in Pakistan.

Therefore, the Node for Policy and Regulations was established in Pakistan in 2007. This center offers various training courses each year in collaboration with ITU on issues related to Telecom Policy & Regulations. These courses will be attended by the countries from the Asia & the Pacific Region.

This platform provides an opportunity to the countries of Asia Pacific Region to share expertise on highly specialized issues related to telecommunication. 49 ITU Member countries from the Asia & the Pacific region will be benefited from the programs offered through these CoE Nodes.

vi). Regulatory Measures
After successful deregulation of the telecom sector, government is endeavoring for higher telecom growth in the country. Prudent and transparent policies are also in place to achieve this objective and PTA has taken several measures for the uplift of the sector including Mobile Number Portability (MNP), simplified licensing, telecom liberalization in AJK and NAs, International Mobile Equipment Identity (IMEI) System to counter mobile handset theft, rural telecom development, quality of service and consumer protection.

a). Licensing of Telecom Services
Issuance of licenses for the telecom services in Pakistan is one of the core functions of PTA. In this regard, transparent and simple procedures have been adopted and till now, PTA has issued 6 cellular mobile licenses and 92 WLL licenses for operations in different telecom regions. Similarly, a total of 76 licenses have been issued for the provision of Fixed Local Loop services. Also, PTA has issued 14 licenses to 14 telecom companies for the provision of Long Distance and International services in the country. In addition, 720 licenses have been issued for value added services.

The Class Value Added Services (CVAS) Regime was implemented in October 2005. So far 221 CVAS licenses have been awarded. This new regime is more simplified under which more than 15 different individual license categories i.e., Data type and Voice type. Under the existing value added service, old licenses are also being converted into new CVAS licenses.

b). Telecom Developments in AJ&K and NAs
Keeping in view the rising demand of AJK and NAs for advanced telecom facilities, telecom sector liberalization has also been in these areas after the mutual decision of the Governments of Pakistan and AJ&K to open the telecom facilities in the region. In this regard, licensing for cellular mobile took place in June 2006 in Islamabad, where Mobilink, Warid, Ufone and Telenor were awarded licenses to operate services in AJ&K and NAs. Similarly, licensing for fixed line and wireless local loop is also underway.

c). Payphones Concessions and Facilitation
To make payphone business sustainable, PTA has announced a substantial reduction in the Annual License Fee (ALF) of Card Pay Phone Operators (CPPO) i.e., PTA will now charge only 0.1 percent ALF from Card Pay Phone Operators on their gross revenue with effect from 1st July 2006 instead of 1.5 percent. Further, the Authority also rescheduled the Annual License fee outstanding up to June 30, 2005 for all payphone licensees. The ALF is payable in 6 equal installments on a bimonthly basis starting from December 16, 2006.

The business of Fixed Line CPPO segment which had a mushroom growth in the last few years is shrinking due to growth of mobile PCOs. Due to this reason as well as for economy of scale, consolidation of some businesses is expected in future. In this regard, the operators’ requested and PTA assured the operators that it will facilitate Mergers and Acquisitions of Payphone Operators/Companies. Payphone operators will submit specific proposals to PTA for consideration of mergers. Mobile operators have been asked to facilitate Payphone operators by offering discount on Mobile Termination Rates and to consider offering better packages to licensed payphone operators. PTCL was also asked to revise its tariffs for the payphone industry.

vii) Implementation of Broadband Policy and its Impact:
As of June 2007, there are 45,153 DSL subscribers, over 28,800 cable subscribers and over 5,000 on fixed wireless and other technologies in the country. Total broadband subscribers are around 115,000 by the end of 2007. (Fig 7, Fig 8)

Through proactive initiatives of the Ministry of IT, broadband is currently available @ Pak. Rs.999 per month in major cities of country. This has resulted with activities of key broadband operators, service providers and O&M contractors to quickly capture the most market share of this highly attractive market. On the other hand, such initiatives of Ministry of Information Technology are beneficial for compliance with the directives of WSIS declaration plan of Geneva for furthering spread of ICT services and information society development in the country.

Nevertheless, Pakistan's broadband market has remained sluggish in 2007 despite the fact that services have been available since almost five years. Currently there are 71,000 Broadband subscribers and 65% of Pakistani broadband users enjoy DSL Broadband technology. Major DSL operators in Pakistan are Micronet, Dancom, CyberNet, MultiNet and PTCL. Almost 70 companies are providing Internet service all across the country with total Internet subscribers having crossed 3 million and total users crossed 17 million marks in 2007. Currently, there are 144,023 PCOs working on fixed line networks of PTCL

Deregulation of telecommunication sector of AJK and NAs that was finalized in 2006-07 resulted in the award of licenses to both fixed and mobile operators. Today there are 912,227 mobile subscribers and 149,029 fixed lines and WLL connections in AJK and NAs. The teledensity is now 20.1%, which was only 3% in 2006. With deregulation of telecommunication in AJK their Telecom infrastructure will grow, teledensity will increase and general standard of living will improve.
(Fig 7)

(Fig 8)
viii) Operational Arrangements of USF and R&D Funds:
To serve the un-served and under-served areas of country and to promote research and development activities, Universal Service Fund (USF) and National ICT Research and Development Funds have been created respectively, through contributions from telecom operators. Carriers (including mobile operators) pay PTA an annual fee not exceeding 1.5% of the previous year’s gross revenue less inter-operator and related PTA payments, to the Universal Service Fund and pay 1% (0.5% for mobile operators) to the Research and Development Fund. The Universal Service Fund (USF) and National ICT R&D Fund are controlled by the Ministry of Information Technology.

a). Establishment of National ICT R&D Fund (NIRDF) Company:
National ICT RDF was incorporated in November 2006 as public limited company by guarantee and funded through contributions from fixed line and mobile operators in the country. The board of directors of the company comprises of representatives of telecom companies, Academia and Government to ensure transparency and effective utilization of funds. The NIRDF, funded mainly by prescribed licensee’s contributions, finances prescribed research and development domains in priority areas of information and communications technology e.g., market and product development.
This fund also caters for HR requirements of the telecom sector. For this purpose a comprehensive Outreach Scholarship Program (OSP) has been devised by the company.

Salient features of the Outreach Scholarship Program are as follows:

Training Imparted to Teachers and Students:
Years
Teachers Trained
Students Trained
2006
182
2,500
2007
700
6,100
Total
882
8,600
Scholarship awarded and Distribution:
Years
FAST-NU
NUST-NIIT
GIKI
Total
2006
200
N/A
N/A
200
2007
300
50
40
390
Total
500
50
40
590
This fund will also cater for HR requirements of the telecom sector. For this purpose a comprehensive Outreach Scholarship Program (OSP) is devised by the company.
In subsequent years, given the incremental number of scholarships i.e. 1000 in 5 years, other universities, preferably public sector engineering, science & technology universities will also be included in this program through ICT Centric University Excellence Program under National ICT R&D Fund Company.

b). Establishment of Universal Service Fund (USF) Company:
In order to spread the benefits of the telecom revolution to all corners of Pakistan, USF was established in 2006 by Ministry of IT. USF aims to promote development of telecommunication services in under-served areas throughout the length and breadth of the country, to make available affordable voice telephony and basic data services to progressively greater proportions of the country’s population at their home locations. Universal Service Fund (USF) is funded through contributions from fixed line and mobile operators in the country. The board of directors of the company is comprised of representatives of telecom companies to ensure transparency and effective utilization of funds.
The USF is the only company with focus to provide access to telecommunications services in remote and un-served (or under-served) rural areas. It is to be funded mainly by prescribed licensee contributions. USF goals are to be achieved by 2010 that is to provide access of 85% (95% by 2015) of the population to desired services, bring total rural teledensity of 5%, and to establish at least one telecenter for every 10,000 people (Universal Service Fund Policy, 2006). Provision of USF services is to be auctioned among licensed operators according to the lowest subsidy bid, and will be allowed to earn a “reasonable” return. USF has prioritized lots for auction. First pilot lot, Telenor has won the bidding for commissioning of services in Malakand Division. Total bid cost was Rs 1.5 billion with a subsidy of Rs 310 million. The signing ceremony of pilot lot between USF and Telenor was held on 4th October, 2007.

ACHIEVEMENTS OF TELECOM SECTOR DURING 2004-2007

2008-02-13T05:06:00.001-08:00

ACHIEVEMENTS OF TELECOM SECTOR DURING 2004-07

Telecommunications is one of the rapidly growing sectors in the country and by realizing the importance of information and communication technologies the Ministry of IT and Telecom is actively engaged in development of telecom sector in Pakistan through liberal, competitive and consumer focused policies of telecom sector.

Implementation of Cabinet Approved Policies:

The Federal Cabinet approved the following three policies (formulated by Ministry of IT) for the telecom sector:

o Fixed Line Telecom Deregulation Policy July 2003
o Mobile Cellular Policy January 2004
o Broadband Policy December 2004

Implementation of Fixed Line Policy and its Impact:

The fixed line sector deregulation policy was prepared with the key objectives of improving infrastructure development, increasing capital investments and to harness local entrepreneurship in the sector. It is focused to effectively increase quality and choice of affordable services for businesses and consumers in the telecom sector. Moreover, it is aimed to protect national security interests, extension of telecommunications services to un-served areas of country and to promote fair competition amongst telecom licensees.

In view of the above, Ministry of Information Technology is actively facilitating telecom operators to roll out and start businesses in befitting manner. For this purpose, Government of Pakistan has granted 14 Long Distance International (LDI) and about 38 Local Loop (LL) licenses. Out of these, eight LDIs have started their operations during the preceding years and have established more than 94 gateways across the country. LDIs have increased their Point of Presence (PoP) to 179 through out the length and breadth of the country. Similarly 10 out of 38 LL companies have become operational while others are actively planning their rollout endeavors. Due to these supportive measures, more and more operators are rolling out telecom networks in the country and such measures are being witnessed to produce very encouraging results from operators in terms of increased network accessibility, coverage and quality of service. On the consumer side, these have resulted in lowered call rates, increased service alternatives and improved customer support.

Wireless local loop (WLL) services were introduced in Pakistan in 2004. For this purpose government has issued 16 WLL licenses, out of which 5 WLL companies are fully operational by now. There has been a considerable growth over the last two years and currently WLL subscribers in Pakistan have crossed to over 1.76 million subscriber base.

Implementation of Mobile cellular Policy and its Impact:

Wireless communications is another vital part of telecom sector and due to liberal government policies this sector is experiencing enormous growth in the country.

The number of Cellular Mobile has increased over 63.15 million users at the end of July, 2007 as compared to 36.77 million in July, 2006. Net increase in Mobile Cellular subscribers during 2004-2005 has been around 7.96 million, about 20 million during 2005-06 and approximately 26.38 million during 2006-07. Since, the total cellular subscribers have crossed the figure of 63.15 million in the country it is forecasted that by December 2007 the total number of cellular subscribers would cross 78.4 million users bringing the total cellular penetration of 49.2% in the country.

Some key initiatives in wireless sector over last few years are:

i. Mobile Theft Deterrent Initiative:

During the last few years, the Mobile Handset theft has been on rise including cases of snatching and stealing of handset. This has been an area of concern for government and general public. To safeguard the interests of mobile users, PTA endeavored to control the situation through industry cooperation and with the help of City Police Liaison Committee (CPLC). Consequently, IMEI/EIR facility has been successfully launched w.e.f 30th September 2006 across the country. Till now, this system is extensively utilized in blockage of stolen handsets and has proved significantly useful deterrent of mobile snatching.

ii. Mobile Number Portability (MNP):

Mobile Number Portability (MNP) is the ability of a mobile subscriber to retain his/her number when changing network operators within a country. Mobile Number portability is a key aspect of deregulation policy to ensure fair competition in the telecom industry.
The absence of MNP may give the existing cellular mobile operators a significant competitive advantage over new entrants in the market. Realizing the importance of MNP to improve competition among cellular operators, Mobile Number Portability service has been launched in the country with effect from April 2007. This is an important mechanism from the government to enhance fair competition among different cellular mobile operators to ensure improved customer service quality and to provide freedom in selection of their cellular service.

iii. Mobile Banking:

With collaboration with State Bank of Pakistan, telecom industry and Ministry of IT is actively involved in devising ways to introduce mobile banking in Pakistan. Currently the Ministry is actively involved in chalking out details of such facilities for general public in order to provide them a secure, robust and convenient banking mechanism. Ministry of IT is engaged in envisioning the policies and regulations required for such services.

iv. Policy Guidelines for Mitigating Environmental and Health Related Effects of the Cellular Base Station Antennas.

The Ministry of Information Technology on 2nd April 2007 issued a policy to the PTA for establishing national guidelines for mitigating environmental and health related effects of the Cellular Base Station Antennas. This would address public concerns about radiation hazards of the radio infrastructure. In this regard a detailed research study has been conducted by the IT Ministry to take stock of the situation. Radiation hazards from the base stations were thoroughly analyzed in light of international research and recommendations of standards bodies (ANSI/IEEE and the International Council for Non Ionizing Radiation Protection (ICNIRP). The study report was also circulated to the Ministries of Health, Environment, Pakistan Telecommunication Authority (PTA) and the industry stakeholders for comments and recommendations.

In view of the study and extensive consultation MoIT has decided that Pakistan also needs to adopt a precautionary approach in light of non-conclusiveness of international research and put in place safeguards against any remote chances of health hazards due to cellular antennas. For this purpose, policy measures and guidelines are devised based on international best practices and PTA is responsible to take all necessary actions as relevant to the policy measures and guidelines. PTA would also launch public awareness campaign so that policy guidelines are implemented in true spirit and concerns of the general public and local/provincial authorities are addressed in a satisfactory manner.

v. Policy Guidelines for Mobile Virtual Network Operators (MVNOs).

The Cabinet approved Cellular Mobile Policy authorized PTA to prepare a detailed framework under which the Mobile Network Operators (referred to as MNOs), would be permitted to have commercial arrangements with other companies to act as Mobile Virtual Network Operators (MVNOs). Accordingly, PTA had to come up with the governing framework, within MNO rights and obligations, for operation of services by MVNOs within two years of the issuance of the Policy. In this regard, public consultation for the subject framework, based on two models, was floated by PTA embodying the recommendation for adoption of a simple reseller/distributor type of model. After going through the consultative process, Ministry of IT has requested PTA to observe policy guidelines entailing that any framework for MVNO should inter-alia also include MNO rights, obligations and general principles. PTA’s suggested framework for MVNOs is to be improved in the light of ministry guidelines in order to close the consultative process. Currently MOIT is in the final stages of devising the MVNO regime and finalizing the directives for announcement, introduction and implementation of these policy guidelines.

Implementation of Broadband Policy and its Impact:

Another important policy is the Broadband Policy for Pakistan, which was formulated and approved in Dec.2004 by the Government of Pakistan, after a consultative process involving all stakeholders in the sector. The focus of this policy is to support the proliferation of IT and IT enabled services in the country. The Ministry of Information Technology is facilitating penetration of Broadband/ICT services throughout country though active measures. Rates of international bandwidth have been reduced tremendously and currently international bandwidth is available at a price of around US $ 1,000 per E-1 to facilitate the broadband service users. MoIT, PTA and Industry Stakeholders have worked jointly to come up with a comprehensive licensing framework of broadband service providers. License templates have been finalized and announced for the public. The new regime has facilitated the operators. Simplified procedures and harmonization of the licensing framework concerning new ISPs/DNOPs have contributed in the proliferation of broadband service in Pakistan.

As of June 2007, there are 35,000 DSL subscribers, over 40,000 cable subscribers and over 30,000 on broadband wireless (EVDO) in the country and total broadband subscribers are expected to be around 125,000 by the end of 2007. Through these initiatives of the Ministry of IT, broadband is currently available @ Pak. Rs.999 per month in major cities of country. This has resulted with activities of key broadband operators, service providers and O&M contractors to quickly capture the most market share of this highly attractive market. On the other hand, such initiatives of Ministry of Information Technology are beneficial for compliance with the directives of WSIS declaration plan of Geneva for furthering spread of ICT service in the country.

In short, this enormous growth in telecom sector amply speaks about the success of the Telecom Deregulation, Cellular Mobile and Broadband policies in Pakistan. It clearly demonstrates the successful implementation of government policies for telecom sector and this sector is now perceived to be the most dynamic and vibrant sector of Pakistan. The success of these policies can be gauged from enthusiastic interest shown by the new business entrants, increased activities in the sector and the improved telecom penetration levels that were around 35.4% by the end of Dec 2006 (combined fixed and mobile Teledensity). At the end of July 2007, total teledensity in the country has crossed 45.04% and further increase in this sector is envisioned.

Privatization of PTCL:

The fixed line monopoly held by the state-owned Pakistan Telecommunication Company Limited (PTCL) on local, long distance and international services was terminated from 2003 (Deregulation Policy for the Telecommunications Sector, 13 July 2003, Pakistan Telecommunication Rules, 2000). Policy aims are to liberalize the sector by encouraging “fair” competition and maintaining an effective internationally best practice regulatory regime. PTCL, originally 88% state owned, has a further 26% equity divested to an overseas company Etisalat International in July 2005, thereby reducing state equity to 62%.

Sale deed of 26% shares of PTCL amounts to US $ 2.59 Billion. The management control has been handed over to Etisalat International Pakistan (EIP) in April 2006 and the company is operating independently under its new regime.

Settlement of GHQ concerns on the Privatization of PTCL:

With the privatization of PTCL, the concerns raised by various stakeholders such as NTC, PTCL, GHQ, Armed Forces are resolved. Moreover pending issues of the tariff agreement between GHQ and PTCL was taken and amicably settled in the form of Tariff Agreement between both the entities for the Transaction period. In addition to these, the issue of CPP was resolved through active facilitation from Ministry of IT. The receivables by GHQ of the four cellular mobile operators and PTCL were settled down and an amount of Rs.600 Million was disbursed to close an issue prevailing for more than three years was closed.

Inter-ministerial Technical Committee on Convergence and Joint Mechanism for Licensing:

Pursuant to the directive of Prime Minister’s Secretariat, Ministry of Information Technology constituted an Inter-Ministerial Technical Committee on Convergence and Joint Mechanism for Licensing and various meetings were held at MoIT to resolve the issue of MMDS license and convergence of the Regulatory Bodies. Inter-ministerial Committee has resolved the MMDS license issues and finalized the frequency allocation plan for broadcast and telecom sector and is further deliberating on the convergence of Regulatory Bodies. After completion of the deliberations, the Committee has compiled an extensive report for the future roadmap of the convergence policies in the country which would be presented to competent forum.

Operational Arrangements of USF and R&D Funds:

To serve the underserved areas of country and to promote research and development activities Ministry of IT envisioned Universal Service Fund (USF) and National ICT Research and Development funds through contributions from telecom operators. Carriers (including mobile operators) pay PTA an annual fee not exceeding 1.5% of the previous year’s gross revenue less inter-operator and related PTA payments, to the Universal Service Fund and pay 1% (0.5% for mobile operators) to the Research and Development Fund. The Universal Service Fund (USF) and National ICT R&D Fund (RDF) are controlled by the Ministry of Information Technology (Pakistan Telecommunication (Amendment) Ordinance, August 2005, Universal Service Fund Policy, 2005, and Research and Development Fund Rules, September 2006).

i. Establishment of ICT RDF Company:

ICT RDF was created in November 2006 as private company through contributions from fixed line and mobile operators in the country. The board of governors of the company is comprised of representatives of telecom companies to ensure transparency and effective utilization of funds. The RDF, funded mainly by prescribed licensee contributions, finances prescribed research and development in priority areas of information and communications technology e.g., market and product development (The Research and Development Fund Rules, 2006).

This fund will cater for HR requirements of the telecom sector. For this purpose a comprehensive Outreach Scholarship Program (OSP) is devised by the company. Following results were achieved from OSP 2006:

Description
Planned
Actual
Number of participating students
2,000
3,050
Number of candidates expected (10% drop out)
1,800
2,565
Number of candidates appearing
1,700
2,365
Number of trained teachers
150
182
Number of participant principals
-
51
Number of total beneficiaries
2,200
4,183
Number of participating schools
50
70
Number of Zones
9
14
Testing centers
2
15
Male/Female candidates
75:25
72:28

The feedback indicates that the performance of students of OSP has been better than the regular intake of the university. For 2007-08, the National ICT R&D Fund will execute the program through National University of Computer & Emerging Sciences (NU-FAST), Ghulam Ishaq Khan Institute (GIKI), Lahore University of Management Sciences (LUMS) and National University of Science and Technology (NUST). In subsequent years, given the incremental number of scholarships i.e. 1000 in 5 years, other universities, preferably public sector engineering, science & technology universities will also be included in this program through ICT Centric University Excellence Program under National ICT R&D Fund Company.

ii. Establishment of USF Company:

USF was created in December 2006 as private company through contributions from fixed line and mobile operators in the country. The board of governors of the company is comprised of representatives of telecom companies to ensure transparency and effective utilization of funds.

The USF is used solely to provide access to telecommunications services in remote and un-served (or under-served) rural areas; it is to be funded mainly by prescribed licensee contributions. USF goals are to be achieve by 2010 that is to provide access of 85% (95% by 2015) of the population to desired services, bring total rural teledensity of 5%, and to establish at least one telecentre for every 10,000 people (Universal Service Fund Policy, 2006). Provision of USF services is to be auctioned among licensed operators according to the lowest subsidy bid, and will be allowed to earn a “reasonable” return. USFC has prioritized lots for auction and pilot lot auction is expected next month.

Establishment of Deregulation Facilitation Unit:

The “De-Regulation Facilitation Unit (DFU)” was created on 1st July 2004 to assist the Ministry of IT in driving the process of expeditious implementation of de-regulation in the telecom sector.

The primary aim of establishing DFU was to undertake the task of analyzing progress of the de-regulation process, facilitating investors and ensuring that the de-regulation implementation time-table is being followed by the concerned agencies. The unit aims to identify the bottlenecks in the implementation of the de-regulation policy and bring the same to the attention of the relevant authorities so that these could be examined and addressed. The Unit was also expected to create a repository of information and provide access to professional services for investor facilitation. Other key activities were required to be undertaken by the de-regulation facilitation unit were to present progress in the matter relating to de-regulation and identify the need / arrange to undertake any consultancy works by domestic and international consultants on issues that emerge from the progress of de-regulation.

Achievements:
Coordinated with PTCL, PTA and FAB vis-à-vis general and specific tasks to be undertaken by these entities along with timelines (where applicable) for implementation of de-regulation policy.
Facilitated operators in seeking the “Right of Way” (RoW) needed by new operators to construct their networks
Major involvement in the Preparation of rules and operating framework for Research and Development Fund
Involved in the Establishment of Universal Service Fund (“USF”).
Engagement in the preparation of framework of obligations on licensees for opening ducts, poles or other such facilities to competitors when they enjoy Significant Market Power.
Prepared the Cabinet Summaries detailing license documents, process etc pursuant to Cabinet decision on de-regulation policy
Prepared the roadmap for the broadband uplift in the country.
Supervised the ICT related research and development projects within the academia of country
Monitored and updated the telecom stats of the country
Monitored and evaluated the content of websites in view of national security.
Prepared various Summaries for the approval of Cabinet, ECC and CCoP
Contributed in reducing activation tax on mobile cellular services
Prepared recommendation for awarding grace period to WLL and Mobile Cellular operators
Periodic contribution in issues related to PTCL privatization including voluntary separation scheme
Significant contribution in launching and executing Outreach Scholarship Program for the talented students of non-metropolitan areas of the country
Provided input in creating a framework for introducing mobile commerce in Pakistan
Issuance of various policy directives for limited mobility, mobile theft etc
Establishment of International Coordination Unit:

To facilitate international coordination and liaison the Ministry has incorporated International Coordination Unit since April 2007. The unit is actively involved in coordination and liaison activities with international organizations like ITU, APT, CTO and many others. The goal of the unit is to ensure that Pakistan stays ahead in international collaboration in telecom sector while actively participating in international forums for ICT and Telecommunications matters.

MoIT represented the Government of Pakistan in all international forums like ITU, APT and CTO through active facilitation of its international coordination unit. Telecom Wing actively participated and responded to various queries/studies required by these organizations. MoIT benefited itself and telecom sector including PTCL, PTA, NTC, SCO, FAB from various training opportunities offered by ITU, APT and CTO. These trainings would enhance the HR profiles, experience available in telecom sector within the country. Telecom Wing represented GOP point of view in various international forums like ITU Council 2005 and 2006, various APT meetings and have actively contributed in ITU events like WSIS, World Telecom Development Conferences. One of the Pakistan proposals on disaster relief assistance was given a global status in World Telecommunication Conference in Doha in 2006. Pakistan also contested for ITU Council and Radio Regulation Board seats during ITU Plenipotentiary Conference in November 2006 and through active efforts of Ministry of IT, it is now an active member of these esteemed forums.

Reconstitution of Frequency Allocation Board (FAB):

Frequency Allocation Board has exclusive authority to allocate and assign portions of radio spectrum to the Government organizations, telecommunication services, electronic media and other users in Pakistan. In this regard, government has reconstituted the board and has assigned it with responsibilities of spectrum reframing, new spectrum allocation and spectrum allocation in the country.

After the successful implementation of two new cellular licenses and spectrum reframing to allow an efficient dual band spectrum allocation to all GSM operators of Pakistan for efficient use of frequencies, FAB has been entrusted the task of facilitating existing licenses in clearing interference issues arising out of the legacy spectrum owners and licenses operating public switched mobile and wireless networks.

In addition, looking forward in the future FAB has been given the task to reframe and clear spectrum for a host of services envisioned for 3G and 4G era. Government of Pakistan is cognizant of the fact that for developing economies like that of Pakistan the way forward is to open up new lucrative spectrum bands to all wireless broadband access in the local loop.

International Recognition of Pakistan’s ICT Initiatives:

i. GSMA Award for Best Policies of the Government:

Global System Mobile Association has awarded Pakistan the prestigious award of best government policies to government of Pakistan in year 2005 for its very efficient policies and transparent implementation which not only fetched huge amount of FDI but also earned international investors’ confidence.

ii. ITU Asia Pacific Center of Excellence:
(PTA node for Policy and Regulations)

In the first stakeholders meeting of the International Telecommunications Union Asian-Pacific Region Center of Excellence (ITU ASP CoE) in Bangkok, Thailand on the 19th to 20th October 2006, Pakistan was selected and given the mandate to become the CoE node in the Asia Pacific Region for Policy & Regulations. Accordingly Ministry of Information Technology, MoIT (IT&T Division) assigned the task to PTA for the establishment of ITU Regional Center of Excellence (CoE) Node in Pakistan.

Therefore, the Node for Policy and Regulations was established in Pakistan in 2007. This will offer various training courses each year in collaboration with ITU on issues related to Telecom Policy & Regulations. These courses will be attended by the countries from the Asia & the Pacific Region.

This platform will provide an opportunity to the countries of Asia Pacific Region to share expertise on highly specialized issues related to telecommunication. 49 ITU Member countries from the Asia & the Pacific region will be benefited from the programs offered through these CoE Nodes.

Special Communications Organization:

1. Achievements
a. Subscribers Based Capacity increased from 102,092 lines to 360,473 lines in AJ&K and Northern Areas.
b. Working Connections increased from 80,770 lines to 248,473 lines in AJ&K and Northern Areas.
c. Combined Tele-Density Increased from 1.96 to 5.48 in AJ&K and from 1.53 to 4.98 in Northern Areas.
d. SCO Launched GSM Services (SCOM) in AJ&K and Northern Areas.
e. SCO Launched WLL Services (SCO CDMA) in AJ&K.
f. SCO Launched Broadband Internet Services (Snet) in AJ&K.
g. SCO International Gateway Exchange and Satellite Earth Station projects completed.
h. Enhancement of Reliable Backhaul Media by Laying of 1600 Km OFC Network (From Mansehra – Gilgit, Gilgit – Skardu/Youching, and between Inter Transit & Main Exchanges of AJ&K of NAs).
Revenues of SCO (in Million Rupees):
2004-05
2005-06
2006-07
1545.157
1373.094
1619.436

2 Growth of Telecommunication Infrastructure.

S/No
Detail
August 2006
August 2007

AJ&K
NAs
Total
AJ&K
NAs
Total
a.
Exchanges
128
67
195
122
68
190
b.
Installed Capacity (Fixed)
117,171
26,897
144,068
143,722
35,001
178,723
c.
Installed Capacity (Mobile)
55,000
-
55,000
85,000
41,525
126,525
d.
Installed Capacity (WLL)
25,000
5,100
30,100
50,000
5,128
55,128

Total
197,299
31,997
229,168
278,722
81,654
360,376
e.
Working Connection (Fixed)
87,004
17,236
104,240
86,384
21,955
108,339
f.
Working Connection (Mobile)
53,000
-
53,000
84,125
27,297
111,422
g.
Working Connection (WLL)
7,056
2,945
10,001
26,000
2,712
28,712

Total
147,060
20,181
167,241
196,509
51,964
248,473
h.
Tele-Density
4.25
1.94
3.71
5.48
4.98
5.37

3. Major Projects

a. GSM Project for AJ&K and NAs.

GSM Project of 50,000 lines for AJ&K and NAs was approved by ECNEC on 18 February 2004 at cost of Rs.450 million. The Project was commissioned on 20 November 2005 in AJ&K. More than 70% area of AJK is under effective coverage of SCOM. Due to mounting public pressure, the existing capacity of SCOM network has been expanded up to 85,000 out of which 84,000 connections have already been sold. GSM system in Northern Areas was launched by SCO on 14 August 2006 in nine cities with limited capacity of 15,000 subscriber based however due to pressing demand of the people of the area expansion of the system is in progress.

b. Rural Telecommunication Uplift Project for AJ&K Phase-I.

The originally project was planned to provide 80,000 lines with microwave and OFC Media at a cost of Rs 1486 Million and approved by ECNEC on 11 August 2003. The revised Pc-I for 114,000 lines at a cost of Rs 1706 Million has been prepared and forward to MoIT for further process. Summary of the project is as under:-

Planned Completed

(1) Total Number of Lines - 114000 107,500
(2) Digital Exchanges - 62 44
(3) Microwave Stations - 44 27
(4) Laying of Optical Fiber Cable- 266 Km completed

c. Expansion and Improvement of Telecommunication Facilities in NAs Phase-II.

The project was planned to provide 18,000 lines with MW and satellite media at a cost of Rs 668.996 million for NAs. The project was approved on 27 July 2004. Summary of the project is as under:-
Planned Completed
(1) Digital Exchanges - 26 26
(2) Digital lines - 18,000 18,000
(3) VSAT Station multi channels - 35 28
(4) Microwave Stations - 10 in Progress

d. Interconnect Billing and Customer Support System.

SCO’s interface with the new operators requires a state of the art interconnect billing system, to comprehensively monitor and record the traffic. The project at a cost of Rs 580 Million was approved on 14 December 2005. It aims at expansion of existing and installation of new Billing and Customer Support System for NAs and AJ&K. Contract has been signed with vendor and project is likely to be completed with in 15 months time period.

e. Laying of OFC between Mansehra to Gilgit.

To improve backhaul for NAs, the project for laying of 450 Km OFC with STM-16 connectivity was started from Mansehra to Gilgit in 2004. By September 2005, 438 Km OFC had been laid along Mansehra - Balakot-Kaghan - Naran - Jalkhad - Gittidas - Batoga – Chilas - Jaglot - Gilgit. However, due to devastating earthquake of 2005, about 85 Km OFC was damaged between Mansehra- Kaghan- Naran . Re-laying of OFC is not likely till realignment / reconstruction of road infrastructure. To bridge the gap and make OFC link operational, a Microwave link between Thandiani – Naran has been established.

f. OFC Project in AJ&K.

To meet the continuously increasing demand of PSTN, Cellular and WLL services, project for laying of 266 Km OFC through FWO was initiated in Dec 2004 which has successfully been completed. In order to link all Districts and Tehsil HQs level exchanges with the transit and main exchanges laying of 570 Km OFC was started in Dec 2006, out of which about 450 Km OFC has been laid. Project will be completed by end of June 2008.

g. Northern Areas Terrestrial Microwave Link.

The project of terrestrial microwave link - NAs was planned at a cost of Rs 490 M. It will extend the terrestrial backbone from Gilgit to Rawalpindi, thereby providing redundancy to Mansehra - Gilgit Optical Transmission System. Contract for Terrestrial MW Link was signed on 29 May 2007 with M/s Nera and is likely to be completed by June 2008.

h. Cross – Border Cable System Between Pakistan and China.

President of Pakistan during his visit to china in February 2006 showed keen interest to the KKH up gradation project. President proposed that work on the projects on construction of Railway Line, Gas Pipe Line and Fiber Optic Cable should be started simultaneously with the KKH up gradation. A Memorandum of Understanding (MoU) for construction of Cross – Border Cable System between Pakistan and China has been signed during recent visit of the Prime Minister of Pakistan to China on 17 April 2007. China Telecom Corporation and SCO will form a working group to coordinate technical details.

National Telecommunication Corporation
NTC was established to provide basic Telephony and Data services to Govt./Semi Government organizations including Defence Forces. The achievements of the Corporation in the last three years are mentioned below:

S.No #
Description
2004-05
2005-06
2006-07
1
Total Working Connections
81,299
93,220
100,229
2
Total capacity of telephone Lines
91,303
112,304
121,351
3
Telephone Exchange Installation
76
97
108

MAJOR PROJECTS
Ø Deployed Next Generation Network (NGN), in major Cities of Pakistan.

Ø Deployed 32x latest technology based exchanges throughout Pakistan.

Ø WLL services has been started in major cities of Pakistan.

Ø Deployed Optical Fiber Access Network (OFAN) network at Islamabad, Karachi and Gawadar.

Ø Deployed International/NWD Booking System in order to extend call booking facility to NTC designated subscribers.

Ø Deployed Video Conferencing System to extend video conferencing facility to NTC designated subscribers.

Ø Web-hosting for Government of Pakistan (GoP).

Ø Up-Gradation of Junction Network from STM-4 to STM-16 at Islamabad.

Revenues of NTC (in Million Rupees):
2004-05
2005-06
2006-07
2376
2050
21551
1. Draft amount for FY 2006-07

Snapshot of Telecom Sector indicators for Last 3 Years

i. GST/CED Collection from Telecom Sector (Rs. in billion)2

2004-05
2005-06
2006-07
Mobile
9.9
18.8
27.3
Basic Telephony*
9.7
7.7
7.6
Others**
0.9
0.3
0.21
Total
20.5
26.8
35.121

ii. Comparison of FDI in Telecom Sector with Total FDI in Country2

Years
Total FDI
FDI in Telecom Sector
Contribution in
Total FDI (%)
2004-05
1524
494.4
32.44
2005-06
3521
1905.1
54.11
2006-07
5848.6
2228.1
38.091

iii. Growth in Cellular Subscriber Base2

Cellular Subscribers

2004-05
2005-06
2006-07
12771203
34506557
63159857

iv. Total Telecom Teledensity2

Combined Teledensity

2005
2006
20071
Cellular
8.30%
22.21%
40.64%
Fixed Line
3.60%
4.05%
4.40%
Total
11.90%
26.26%
45.04%

1. Figures for last quarter of FY 2006-07 are based on industry estimates.
2. Source: PTA

National ICT R&D Fund - Policy Framework

2007-03-29T05:01:00.000-07:00

National ICT R&D Fund
Policy Framework

Ministry of Information Technology
IT & Telecom Division
Government of Pakistan

June 10, 2006

Prepared By:
NU-Consulting (FAST)
FAST House, AK Brohi Road
H-11/4, Islamabad
( 92-51-111-128-128
Fax: 92-51-4100619
http://www.nu.edu.pk/

In collaboration with
MIMOS Berhad
Technology Park, Malaysia57000-Kuala Lumpur, Malaysia. ( 603-8996-5000 Fax: 603-8996-4658 http://www.mimos.my/
Table of Contents
CHAPTER ONE.. 4
R&D FUND POLICY VISION & OBJECTIVES.. 4
1.1 The Vision.. 4
1.2 Broad Policy Objectives. 4
CHAPTER TWO... 5
POLICY BACKGROUND... 5
2.1 Historical Perspective. 5
2.2 International Best Practices. 5
2.3 Inferences drawn from comparison of Historical R&D Efforts with International Best Practices. 8
2.3.1 Lack of Monitoring Systems. 9
2.3.2 Highly Centralized Organizational Setups. 9
2.3.3 Absence of an Updating Mechanism for Research Objectives. 9
2.3.4 The Need to Install Effective Evaluation Mechanism.. 10
2.3.5 Creating an Environment that Stresses on Accountability. 10
2.3.6 Inability of Local Research to Close the “Innovation Chasm”. 10
2.4 Conclusion. 10
CHAPTER THREE.. 11
POLICY THRUST & BUILDING BLOCKS.. 11
3.1 Policy Thrust. 11
3.1.1 Globalization Forces. 11
3.2 Building Blocks of the Policy. 11
Building Block 1: Enabling Government directives comprising the supportive policies. 11
Building Block 2: Creation of a Legal System that supports a globally connected knowledge based economy and secures intellectual property rights. 11
Building Block 3: A well trained and efficient young manpower. 11
Building Block 4: Efficient and cost effective infrastructure. 11
3.3 Policy Challenges. 11
CHAPTER FOUR.. 13
POLICY ENVIRONMENT.. 13
4.1 The Innovation Value Chain.. 13
4.2 Integrated Thematic Approach.. 14
4.3 Interactive Approach.. 14
4.3.1 Provision of Infrastructure. 14
4.3.2 Establish a vertical and horizontal communication grid. 15
4.3.3 Establish an Integrated Development Framework. 15
4.3.4 Use ICT to develop Private Sector, and healthy triangular partnership between Government, Private Sector, and Civil Society. 15
4.3.5 Create Gender Oriented ICT Policy. 15
CHAPTER FIVE.. 16
STRATEGIC FOCUS OF THE POLICY.. 16
5.1 Strategic Direction.. 16
5.2 The interaction of industry driven R&D and the ICT industry eco systems (fig.2) 17
CHAPTER SIX.. 18
ROADMAP FOR IMPLEMENTATION OF POLICY PRIORITIES.. 18
6.1 The Objective. 18
6.2 Roll Out Plan for Exercising the Provision of the Policy. 18
6.2.1 Gantt chart for Roll out Plan. 19
6.3 Objectives and Strategies to be pursued within Key Areas. 22
6.3.1 Human Resource Capacity Building. 22
6.3.2 National Productivity Enhancement 24
6.3.3 ICT Product Development 25
6.3.4 ICT Market Development 26
6.3.5 Multi-Sectoral Support Program.. 28
CHAPTER SEVEN... 30
THEMES PROPOSED FOR IMMEDIATE FUNDING... 30
7.1 Create awareness amongst potential stakeholders. 31
7.2 Research to Identify Areas of Comparative Advantage for Pakistan.. 31
7.3 Integrated GIS Based National information platform.. 31
7.4 Research, development and operational support for web-enabled services. 31
7.5 ICT support for textile industry. 31
7.6 Provision of physical infrastructure (information technology parks) to facilitate collocation of ICT industry and academic institutions. 32
7.7 Focused Human Resource Development. 32
7.7.1 Support industrial training activities to decrease the cost of Telecom infrastructure deployment 32
7.7.2 Implant industrial training activities in academic institutions. 32
7.7.3 Evolve industrial training centers implanted in academic institutions to centers of excellence. 32
7.7.4 Provide needs based scholarships to students for ICT education. 32
7.7.5 Foreign graduate degree programs offered in Pakistan. 32
CHAPTER EIGHT.. 33
PROCESSES TO ACHIEVE POLICY OBJECTIVES.. 33
CHAPTER NINE.. 34
CONCLUSION... 34

CHAPTER ONE
R&D FUND POLICY VISION & OBJECTIVES

1.1 The Vision
To help transform Pakistan’s economy into a knowledge based economy by promoting efficient, sustainable and effective ICT initiatives through synergic development of industrial and academic resources.

Developing countries are recognizing the need to rapidly develop their knowledge base through massive investments in human resource development. Also, the need to invest in Research and Development efforts to create new products and services; as a way of gaining competitive advantage in an increasingly competitive global economic environment has been given a priority by most nations as part of their efforts to develop their information economy and society. It is also being stressed in the policies of world-wide research activities that research should be commercially driven through its linkages with the industry. Collaborative efforts between academia, research institutions and industry are being emphasized to ensure that local economy can reap the monetary benefits of investment in research.

The knowledge and information economy has emerged as a new source for the creation of quality jobs, wealth generation and redistribution, rapid economic development and prosperity as well as a means for facilitating competitiveness. With the emerging information age, ICTs are seen by a number of countries as critical for achieving progress in economic and social development. These technologies are offering developing countries like Pakistan a window of opportunity to leap-frog the key stages of industrialization and transform their agriculture dominated economies into service-sector driven, high value-added information and knowledge economies that can successfully compete in the international market.

1.2 Broad Policy Objectives
To realize the key aspirations of R&D Fund Policy Vision, the following goals shall be pursued:
· Provide an enabling environment that facilitates deployment, exploitation and utilization of ICT for enhanced national productivity

· Enhance the national ICT related human resource development capacity manifolds by facilitating industrial demand focused human resource capacity building and R&D capabilities in the country and promoting ICT related educational programs and activities

· Help develop a knowledge based ICT industry for delivery of value-added ICT products and services

· Facilitate the development of comparative advantage in the ICT industry

· Make Pakistan an attractive destination for service oriented and research and development related outsourced jobs

· Enhance use of ICT in nationally important segments of economy like agriculture

· Promote indigenous development in Telecom Sector that would support ICT

· Contribute towards the growth of other sectors of economy through deployment of superior ICT products and services

· Cultivate Industry-Academia Partnership

· Provide support to national information and communication infrastructure through indigenous development of ICT products and services

· Spread the ICT activities on a true National Level

· Help develop standards, practices, guidelines and models for the sustainable promotion and growth of ICT

· Use ICT as a tool for poverty alleviation and upward mobility for economically challenged groups of citizens

· Facilitate research and development in those sections of ICT that enhance quality of life for citizens.

CHAPTER TWO
POLICY BACKGROUND

2.1 Historical Perspective

Despite the fact that scores of research activities have been initiated by government agencies, the research and development carried through them has not borne the desired results. After the creation of Pakistan, the initial efforts for starting indigenous research lacked a future perspective. They were planned only to meet the momentary needs. The result is that many of them do not have any effective functioning today. They have been inflexible to change and late in adapting new technologies, mainly because continuous evaluation and improvement has not been a part of their mandate.

2.2 International Best Practices

The important role that industrial and scientific research as well as Research and Development can play in developing a nation’s capacity and capabilities to develop advanced products and services has been acknowledged. For most countries, investments in R&D have been identified as a precondition for a sustained socio-economic development.

In both the developed and developing nations, the driving force behind the development of high-tech industries and services has been huge investments in R&D efforts. In fact, various studies have established a link between economic development and the level of investment in R&D as well as basic and applied scientific and industrial research. For example, evidence drawn from a number of countries, has established strong link between the number of scientists and engineers involved in R&D(per million persons) and the high tech exports (in millions of dollars) of countries.
Keeping these international trends in view, the R&D Fund Policy has been built upon experiences of major research and development activities of advanced economies. The following key elements are derived from the study of International best practices:
Thematic Strategic Research Programs
The thematic approach aims to foster collaborations and greater linkages within the research community and between institutions. It also aims to achieve prioritization of strategic areas for funding. The Thematic Strategic Research Program supports proposals that satisfy one or more of the following objectives:
Creation of high impact
Research that leads to significant benefit to the economy over the medium to long term.

Development of enabling capabilities
Research that leads to the creation of enabling technology platform(s) and technologies that will benefit one or more industry clusters in terms of breadth in the diversity of applications and depth in the value chain.

Support for national priorities
Research that solves specific problems which may compromise nation's stability or impede her economic or social progress.

e. Project Categories

i. Product Technology Development Projects

This category concentrates on research and development of technologies for specific high-tech products that may have a substantial share in the world market. The objective of this category is to promote applied research and technical development based on national and international co-operation creating new, up-to-date, valuable, marketable products, procedures and services as a result.
Such projects will be financed under these categories that contribute towards making the nation a Premier Infocomm Hub. Emphasis will be laid on creation of a conducive pro-business and pro-consumer environment. Formation of the world’s most advanced information and telecommunications networks, next Generation Computers, Sophisticated Service Robots are some examples of preferred investment areas.

ii. Fundamental Technology Development Projects

This category concerns core technologies that are absolutely necessary to advance the economy, society, and human life. This category supports proposals that satisfy one or more of the following objectives:
§ Maximize the ability of citizens to utilize ICT to actively participate in the information society;
§ Strengthen global competitiveness of the economy by promoting informatization in all industries;
§ Realize a smart government structure with high transparency and productivity through informatization efforts;
§ Facilitate continued economic growth by promoting the IT industry & advancing the information infrastructure; and
§ Become a leader in the global information society by playing a major role in int’l cooperation.

iii. Support to the establishment of Co-operative Research Centers (CRCs)

The support is aimed at the establishment of research centers and to support their operation, in which close relations could be developed between higher education institutions, other non-profit research facilities and members of the corporate and business innovation sector, and in which the education, research & development and knowledge and technology transfer can be integrated for strategic purposes.

iv. Projects in application of Information and Communication Technologies

The objective of this category is development and test of marketable, new information and communication procedures, tools and services; establishment of large, information infrastructure with a large band width, based on experimental and modern technology, in the computer network of higher education and research institutions; in addition, promotion of the establishment and dissemination of new digital information systems and services based on image technology, as well as other technologies and skills related to those.
v. Activation for innovation
This is meant to encourage companies to improve their capabilities to develop and apply new technologies. Activities are targeted at new technology based firms and SMEs in particular, as well as new businesses and international cooperation. Large companies are encouraged to participate in long term research projects, which address major technological challenges and involve significant networking with research institutes or SMEs. Activation also promotes regional development.
vi. Technology programs
Technology programs are launched in areas vital to the future of ICT industry. The programs strengthen the national knowledge base, promote the renewal of businesses and industry, competitiveness, research, and enhance cooperation between companies, research organizations and the public sector. Programs emphasize the versatile development and utilization of international and regional technological cooperation.
vii. Selective project funding
This is targeted at projects which produce new knowledge, bear high technological and commercial risks and in which the impact of Tekes’ funding is substantial. The selected technology focus areas are technologies and competences that will continue to develop and will be invested in to create new application potential. Development in these areas will enable new technology leaps. The focus areas chosen are selected strategic development areas within ICT.
Funding is allocated to projects which are assessed to generate the greatest long term benefits to the national economy and society, either directly or indirectly, in relation to the public investments made. Both SMEs and large companies are eligible for receiving funding, however, large companies must propose projects in cooperation with universities or SMEs. Also, the projects proposed by large companies are expected to be more challenging than those proposed by SMEs to receive the same amount of funding.
viii. Development of the innovation environment
Innovation services are developed and provided in cooperation with other financiers and expert organizations. The funding organization contributes to the development of an internationally, nationally and regionally networked innovation environment. The innovation environment is also developed through activities within selective project funding, technology programs and activation for innovation.

2.3 Inferences drawn from comparison of Historical R&D Efforts with International Best Practices

Vast diversity can be observed in the objectives and achievements of R&D projects of the government. Research has been done in many areas and a lot of that research produced result oriented outcomes. A positive sign has been the continuous growth and emergence of such organizations to carry out research in industrial and agricultural regime. Though success and failure is a relative term and we must understand the limitations faced by many such organizations, yet it has been the fact that the aim and objectives could not be met with full potential. This R&D fund in more than ways would be a continuation of the previous efforts in the ICT regime. Most of those efforts yield some productive results but never materialized their full potential. The shortcomings include:

2.3.1 Lack of Monitoring Systems

Most R&D initiatives in Pakistan have defined and very definite monitoring mechanisms yet at most instances it could not be enforced properly. For facilitating the linking of goals and achievements, R&D funds should adopt a technique used by many organizations today, i.e. Management by Objectives. The achievements made by staff members should be praised and recognized regularly to increase their motivations. The jobs of the researchers must not be restricted to mere following of standard operating procedures; instead they should be involved in the broader goals of their activities.

2.3.2 Highly Centralized Organizational Setups

Many research bodies in Pakistan have been functioning according to the centralized rules of management. There has been excessive focus on following the chain of command and most of the power and authority are retained at the top of the hierarchy. This causes unnecessary delays in large research organizations, since top level managers do not have the time to make all the major decisions. Decentralization means delegation of power and authority to lower levels in the hierarchy of an organization. It leads to faster decision making at the lower levels, since most decisions do not have to be referred to the top managers. The executives of the research funds will then have more time to focus on broader goals. Also, decentralization enriches the jobs of lower-level employees by offering the challenge associated with making significant decisions that affect their work. Hence decentralization can be used as a capacity building tool for the employees of research organizations. Finally, decentralization often leads to the establishment of relatively independent units, such as divisions, whose output is easier to measure as compared to that of the entire organization.

2.3.3 Absence of an Updating Mechanism for Research Objectives

With rapidly changing market demands, research activities of the institutes and centers should be regularly reviewed to assess the appropriateness of the goals and to change them or add new ones as necessary. The purpose of the goal-setting and planning processes in MBO is essentially to coordinate efforts towards important organizational goals. Given the rapid pace of technological advancement in the present era, revisions in research objectives are necessary to accommodate major changes in circumstances.

The Research Funds in technologically advanced economies provide some direction to bidders through defining focus areas. However, the focus is not too narrowly drawn to leave room for the researcher’s creativity. It may not be possible for the fund to tap on some of the most current or relevant themes on its own and it is only prudent to allow inflow of innovative ideas from various stakeholders. Public workshops may prove to be a useful exercise in gathering input of the stakeholders for reviewing focus areas for research within a sector. Another important step could be complete separation of the operational and policy mechanism.

2.3.4 The Need to Install Effective Evaluation Mechanism

The performance results and accountability of all R&D programs must be carefully reviewed and evaluated by expert groups in the relevant field. The criterion for evaluation of research programs are validity of program contents, efficiency of program management and effectiveness of program results.

2.3.5 Creating an Environment that Stresses on Accountability

The results provided by the evaluation committee should be used by policy makers in anticipating prospective areas to invest in and to shape a future R&D policy. Furthermore, grants should be redirected from the funds that fail to achieve their objectives. This will create an environment of accountability for R&D to citizens of the country.

2.3.6 Inability of Local Research to Close the “Innovation Chasm”

While evaluating solicited proposals, additional merit should be given to programs that collaborate with a greater variety of stakeholders, i.e. from industry, academia and research institutions.

2.4 Conclusion
R&D must be made a mainstream activity of the government. Priority areas should be defined keeping in view the latest developments in science and technology in the world and R&D budget allocated to different sectors accordingly. The research bodies should function as individual entities operating according to modern management techniques. There should be increased decentralization in research institutes. Performance based evaluation mechanisms need to be installed in each project to increase their efficiency.

CHAPTER THREE
POLICY THRUST & BUILDING BLOCKS

3.1 Policy Thrust

With the world becoming a true global village, the concept of benchmarking and relative measurement has become more complex than ever. It must have always been imprudent to decide on policy issues in isolation but in toady’s world, the relative yardsticks have become more important than ever. The formulation of this policy is in the backdrop of strong forces of globalization that at the same time shape the threats as well as opportunities present in our environment.

3.1.1 Globalization Forces
Following four forces caused by globalization have shaped the policy:

Migration of millions of service oriented jobs from the 1st world to the 3rd world
Level playing field created by ubiquitous availability of all sorts of information through out the globe

Removal of protection given to industry by political entities leading to intense competition.

Increasing role and use of knowledge to enhance productivity.
3.2 Building Blocks of the Policy

The policy will be founded on pillars that would strengthen its claim to be a change agent for the future. These are as follows:

Building Block 1: Enabling Government directives comprising the supportive policies
Building Block 2: Creation of a Legal System that supports a globally connected knowledge based economy and secures intellectual property rights
Building Block 3: A well trained and efficient young manpower
Building Block 4: Efficient and cost effective infrastructure
3.3 Policy Challenges

The policy design facilitates the processes to cope with key challenges faced by the ICT industry in Pakistan in particular and the economy of Pakistan in general. A careful evaluation of the economic forces reveals the following challenges.

· The effects of globalization exposing the local industry inefficiencies and underperformance

· Weak scientific research and development base coupled with the historic failure of most of the R&D organizations

· ICT education that is not aligned with national industrial needs and shortage of practically trained professional human resource support for the industry

· Lack of effective liaison between academia and industry resulting in absence of a strong link between academic research and economic productivity

· Absence of a cohesive and synergic approach characterized by optimal private-public sector partnership and a common vision for immediate term and long term goals

· The rising trends of unemployment despite the positive industrial growth and stability

· The pace with which technology in today’s world is changing and causing constant adjustments in the production processes and economic value of products

· The challenge of turning the youth of the country into a dynamic workforce for future

· The provision of a conducive environment for gender equality and participation of womenfolk in the overall development of the economy

· Increase in the reach of industrial growth to the less developed and marginalized communities and geographical regions

· The effect of rising population causing the decline in per capita income and negative pressure on the indicators for economic performance

· The low job creation capacity of the economy with slow change in focus from conventional and traditional sectors to high tech sectors

· Huge debt burden of the economy hindering the effective allocation of resources to the productive sectors of the economy

CHAPTER FOUR
POLICY ENVIRONMENT

4.1 The Innovation Value Chain

The Innovation Value Chain is a cyclic process. The commercialization of newly developed technologies will result in increasing the industrial revenue which will in turn add to the National R&D Fund in the form of 0.5% - 1% contribution of annual gross revenue by all players of the ICT sector. This process will stimulate the industry to participate in local R&D.
• Legal & Regulatory infrastructure ensures that marketplace rewards innovation & investments
Figure 1: The Innovation Value Chain
Research
Marketing &
Manufacturing
Development
ROI on
Commercialization
Commercialization
Development of new Technologies
Basic Research at
Academic Institutions
Education & Training
• Intellectual Property
Protection

• Funding
• International
Science-based
Standards
• Need legal &
Regulatory Issues
• Supply Chain
Trials
Research
Factories

The Innovation Value Chain ensures that the research carried out via funding by the R&D Fund is well connected to the industry. Additional merit will be given to those research programs that collaborate with a greater variety of stakeholders, i.e. from industry, academia and research institutions. This provides the only way to break the ‘innovation chasm’ that currently exists in Pakistan. The R&D Fund will ensure that the local research proves fruitful for the development of the local industry and that all basic research eventually transforms into applied research for developing new technologies in the local ICT sector.

Human Resource Capability building is one of the building blocks of this policy. The Innovation Value Chain remains incomplete without taking into account the development relevant IT skills in the country for using the newly developed technologies and for improving upon them. Pakistan like many developing countries suffers from a shortfall in critical ICT skills and expertise required for the development and support of ICT applications and systems in both public and private sectors. Without a sustained effort to train workers in key ICT skills, the limited availability of skilled ICT personnel may place an upper limit on development and deployment of ICT within the economy and society. Hence R&D Fund will continue to promote, both directly and indirectly, the updating of skills of the human resource of the country.

4.2 Integrated Thematic Approach

The key to achieving the policy objectives is the Integrated-Thematic approach. It is extremely desirable that the ICT fund give tangible benefits in as short a period of time as possible, therefore, it would make sense to choose a few key nationally important themes in which to invest funds, so that significant progress can be made in solving problems pertaining to these themes.

While selecting a theme for funding, it is necessary to identify all participants of the entire supply chain. This policy stresses on focusing on a complete value chain instead of isolated projects, to ensure economic gains as a result of research and development. In the context of this policy, a theme is a process through which a product or service is developed and marketed. A Theme encompasses activities of all possible stakeholders that participate in creation and marketing of an end-product.

The “integrated” part of the Integrated-Thematic approach implies that a concerted effort is made to find solutions to all problems related to the supply chain of a theme, even if the problems do not fall in the ICT domain. For non ICT related problems relevant funding organizations are identified and a coordinated effort is made to solve these problems.

4.3 Interactive Approach
In countries like Pakistan with a predominant rural setting, the information infrastructure establishment is quite complex and must be complemented by developing the technological installations that in a pure R&D perspective must be driven through an indigenous development program. The overall strategy must be complemented by a development action plan to guide an optimal outcome for the masses.

This policy advocates a comprehensive national framework for ICT policy formulation and implementation. The main objective is to create and use ICT to bridge the digital divide in the country in its entirety. To this effect, the policy suggests the following components to be translated into policy implementation programs.

4.3.1 Provision of Infrastructure

A region specific infrastructural development approach has to be designed. This approach should include projects aimed at providing infrastructural support in terms of backbone ICT facility to various segments of the society and establishment of a national broadband satellite infrastructure.

4.3.2 Establish a vertical and horizontal communication grid

It is necessary to connect major cities, regional cities, urban centers, and rural towns through vertical and horizontal communication grids to deliver effective and efficient services and provide citizens with wider public access through national network systems. Congested Cities should be transformed into Cyber Cities and connected to the vertical and horizontal network centers. This provides a framework for technological transformation, which will increase national consciousness originating from the grass roots.
4.3.3 Establish an Integrated Development Framework

This policy advocates the establishment of an environment that is conducive for the creation and diffusion of information technology. Regulatory policies must be dictated to facilitate the transfer of technology. The legal, institutional and logistical framework has to be created, well organized and coordinated in order to guarantee the growth and development of information infrastructure in the country.

4.3.4 Use ICT to develop Private Sector, and healthy triangular partnership between Government, Private Sector, and Civil Society
The policy advocates that innovative public-private-civil society partnership is necessary to install regional broadband satellite infrastructure, enhance physical network construction and service provision. The policy also encourages promotion of private sector development by creating a conducive legal framework for private sector investments in the industry. The objective is to strengthen the private sector in an active way to ensure that it is capable of acting effectively as an engine for growth and poverty reduction. The development of private sector is an important strategic priority of the government for increasing the economy’s job creation capability.

4.3.5 Create Gender Oriented ICT Policy

This policy must rest on the understanding that technology must be adapted to fit the needs of both rural and urban poor women in order to have an impact on their economic status and improve their living conditions. Rural agricultural women and urban informal sector women should have technological skills and access to their respective stock of information (agricultural and market information), and health and educational information on a constant basis. This information access must be built by taking into account their daily community interaction network. Application of ICT to the existing community interaction network will enhance their social capital base utilizing the various opportunities offered by the information society.
CHAPTER FIVE
STRATEGIC FOCUS OF THE POLICY

5.1 Strategic Direction

The strategic direction will set the roadmap for the future. The strategic focus must be multidimensional and each dimension must be addressed by milestones and action plans. The following strategic direction statements must lead the way:

Establishing an environment where the national and international private sector, based on market forces, can exert its full potential and make Pakistan achieve the comparative advantage in its core strength areas in near future

Invest in human resource development on a sustained basis so that Pakistan’s economy remains competitive as technology progresses globally at an astounding pace.

Making ICT products, services and international quality education accessible to the general public and increase employment through this means

Increasing the use of ICT products and services in nationally important sector of the economy

Creating and establishing knowledge-based industries and using ICT to increase global competitiveness by focusing on industrial processes, product development and innovation

Enhancing ICT’s role as key enabler and thus unleashing the potential of individuals, organizations and businesses to become more productive and efficient, and to create new ideas that enrich lives and produce new value thus improving national productivity and individual quality of life through development of information rich economy

Providing a structured path to the orderly development of the country into an information and knowledge-based society within next 10 years

Turning Pakistan into an e-enabled society where empowered citizens have access to technologies that will provide quality education, efficient government service, greater source of livelihood, and a better way of life

Taking the dividends of ICT to next tier of cities and villages and to marginalized communities

Use ICT to provide good governance to citizens of Pakistan

· Creating a vibrant, safe, efficient, livable society with the active use of ICT products and services

5.2 The interaction of industry driven R&D and the ICT industry eco systems (fig.2)

Figure 2: The interaction of industry driven R&D and the ICT industry eco systems
Industry-Market
Driven R&D
Focused and Strategic
HR Talent
Development
Programs
Strengthen
National R&D Programs
In ICT
Orchestrate National
Innovation System
for ICT
Enhance
ICT Industry
(ICT as industry)
Enhance National
Competitiveness
(Attract Foreign Investment)
Stimulate Value-Added
ICT programs/services
(ICT as enabler)

The research and development activities will to a large extent be aligned with industry and market demand. The human resource development funding will also be aligned with the industrial needs. As this alignment in R&D and HRD funding is achieved we will by policy design strengthen ICT production and the innovation eco system in the country. This innovation eco system will in turn strengthen the development and consumption of value added ICT products and services. These ICT services will positively impact the national productivity and we will have two eco systems positively interact with each other.

CHAPTER SIX
ROADMAP FOR IMPLEMENTATION OF POLICY PRIORITIES

6.1 The Objective

The National R&D Fund Policy sets out Pakistan’s road map in terms of the vision, objectives and policy priorities for developing Pakistan’s information society and economy. The ultimate objective is to: accelerate Pakistan’s socio-economic development process towards the realization of the vision to transform Pakistan into a high income economy and society that is predominantly information-rich and knowledge-based within the next two decades or less.

This Policy will have an operational life of 5 years. It provides a roll out plan to exercise the provisions of the policy extending over a period of five years, which shall be implemented within the life of the Policy. This roadmap addresses the specific aspects of the broad policy issues and commitments of the policy statement.

As a working and living document, it is anticipated that, necessary periodic revisions will be made in relation to its key elements to meet changing developmental objectives and priorities as well as changes in the global economy and advances in the technological environment.

All the subsequent sections in this chapter have a recommendatory status and they are under no circumstances binding on the R&D Fund. Only the Board has the discretion to implement these roll out plans after having it reviewed and modified if needed.

6.2 Roll Out Plan for Exercising the Provision of the Policy

To facilitate the process of transforming Pakistan into a predominantly information rich and knowledge based society and economy, the Policy defines the five priority areas. The policy implementation in these priority areas will be a phased process, i.e. the implementation will gradually phase from the basic priorities to advanced themes. In each successive year, funding will decline in the former category and will be replaced by the latter.

Funding Priorities
Implementation Category
1.
HR Capacity Building
Immediate Term or Basic Category
2.
National Productivity Enhancement
Short term
3.
ICT Product Development
Medium Term
4.
ICT Market Development
Long Term or Advanced Category
5.
Multi-Sectoral Support Program
Long Term or Advanced Category

In the initial phase of its functioning, the Fund will concentrate the major portion of its resources in Human Resource Development. This investment will be expected to give returns to the industry in the immediate or short term time frame. Second Priority will be given to National Productivity Enhancement for identification of comparative advantage and capitalizing on this advantage through development of indigenous industry. Simultaneously, investment will also be made in Product and Market Development and Multi-Sectoral Development via ICT proliferation, however, initially a very small portion of the funds will be dedicated to these areas.

6.2.1 Gantt chart for Roll out Plan

The Gantt Chart for Roadmap for the Implementation of Priority Areas shows the time frames within which objectives for various key areas will be pursued and strategies implemented. The fund will start functioning from mid-fall 2006. (The year dimensions mentioned in the roadmap correspond to the financial years). In the first three years of its functioning, the Fund’s extensive focus will be on Human Resource Capacity Building and National Productivity Enhancement. In the last two years of its operation the focus will shift towards ICT Product Development, ICT Market Development and Multi-Sectoral Support Program.

After three years of functioning, this policy statement may be reexamined by the Board for required adjustments in its priority areas. A revision in the policy objectives would then take place to accommodate these changes. However, after five years of its functioning, the Board must reexamine the priority areas. As shown in the Gantt Chart- Road Map for Implementation of Priority Areas, the policy aims at a five year roll out plan and there is a mandatory revision of policy that must take place in the last quarter of the fifth year of functioning. However, this policy also envisages the possible areas for investment after the policy revision. The Board may continue to fund these areas (represented by shaded portions in Gantt Chart) as per its discretion after the policy revision.

The recommendations are made till year 2010. From that point onwards the themes must be redefined.
Chart 2: Years of Implementation vs. Magnitude of Funding for Priority Areas

6.3 Objectives and Strategies to be pursued within Key Areas

In the following pages is presented the rationale behind each funding priority and the time dimensions in which it will be pursued by the National R&D Fund. Projects on all the priority areas will be pursued simultaneously; however, more objectives of immediate and short term categories will be pursued in the first three years of functioning of the Fund. In the subsequent two years, a greater number of objectives of the medium term and advanced term will be pursued.

6.3.1 Human Resource Capacity Building

Policy Context

The Government acknowledges that the young population of Pakistan can be transformed into an asset by adding value to human resources and providing the environment for utilizing those resources for socio-economic development process. The development of people to support the process of moving Pakistan into an information society and economy is therefore top priority of the Government and the critical role that ICTs can play in this area is fully recognized and shall be promoted by Government.

As part of the objective aimed at producing the right types of skills and human resources required for developing and driving Pakistan’s information and knowledge-based economy and society, the Government will put in place and facilitate the implementation of a comprehensive human resource development program targeting critical skill areas across key sectors of the economy for supporting the development of Pakistan’s information society and economy.

Policy Objectives and Strategies

The objectives and respective strategies to be pursued through the Fund and the time dimension in which they should be achieved are as follows:

Objective A: Promotion of education to all segments of the society

The Fund will invest in
§ Modernization of Pakistan’s educational system using ICTs to improve and expand access to educational, training and research resources and facilities;
§ Improve the quality of education and training and make the educational system responsive to the needs and requirements of the economy and society with specific reference to the development of the information knowledge-based economy and society
§ Promote ICT skills in all schools and tertiary institutions.
§ Direct special efforts at promoting the use of these technologies in rural, urban and underserved communities.
§ Run a comprehensive awareness campaign to promote R&D vision and culture amongst potential participants.
Objective B: To create and develop, through ICT, formal and informal learning networks for communities, with the goal of cultivating an ethos of life-long, continuous learning for individual, organizational and social advancement

The Fund will invest in:
§ Facilitation and promotion for implementing community based ICT initiatives as well as national ICT applications with human resource development components; including multipurpose community tele-center projects; tele-education and School-Net projects; electronic government and governance initiatives.
§ Programs and initiatives aimed at professional skill development in work places in public and private sector institutions, through in-service training, distance education and training and life-long learning
§ Initiatives targeted at the disadvantaged sections of the Pakistani population including the visually, mentally and physically impaired and disadvantaged.
§ Commit to building capacity of rural population and to encourage more participation of women and children in ICT initiatives and industry by addressing gender based inequalities

Objective C: Develop an IT-trained workforce

The Fund will promote
§ Initiatives targeted at re-training and re-skilling of workers within the Civil and Public Service as well as workers in the private sector to provide them with requisite professional skills and expertise to enable them to fully and effectively participate in the development of the information and knowledge economy.
§ Investment will be made initiatives to improve and upgrade computer skills of workforce in both public and private sector though in-service training and skill update programs.
§ Life long learning within the working population to promote on the job training ad continuing education.
§ Training programs in ICTs in key industries for their workforce.
§ Training of women in key skills required by information and knowledge economies.

Objective D: Creation of industry driven HRD

The Fund will invest in
§ Creating linkages between educational and training systems and industry thereby supporting the development of the requisite pool of highly skilled human resources, knowledge workers and expertise capable of facilitating the process of developing a technology-based knowledge driven industrial sector.
§ Development of a comprehensive human resource base in critical skill areas required for a vibrant, value-added ICT services industry
§ Encouraging internships and work-study programs

6.3.2 National Productivity Enhancement

Policy Context

The Pakistani ICT sector is underdeveloped. Majority of the companies in this sector are involved in distributive activities like retailing and the distribution of computer products and services, mainly computers and their peripherals and standard application software and packages. It is acknowledged that the development of Pakistan’s information and knowledge economy will require a vibrant ICT industry that focuses on export-oriented ICT products development.

Policy Objectives and Strategies

The objectives and respective strategies to be pursued through the Fund in the field of National Productivity Enhancement are:

Objective A: Telecom and Internet Infrastructure Development

The Fund will invest in
Promoting and facilitating initiatives targeted at the development of a reliable, fast adaptive and robust national ICT backbone and infrastructure
Ensuring that as far as possible development is not constrained by inadequate transport, communications and energy infrastructures and networks
Modernize and expand Pakistan’s information and communications infrastructure and services to improve universal access and quality of service
Promote the development and deployment of broadband and multi-platform communications infrastructure to facilitate public access to information and services

Objective B: Indigenous Development of ICT Products and Services

The Fund will invest in development of local content and applications in the area of information and communication technologies to meet the needs and requirements of the nation. Development of a broad engineering base will be financed, especially in the maintenance, repair and fabrication of machinery and equipment.
The Fund will invest in development of world class software products targeting both the domestic and export market.

Objective C: Development of Advanced Information and telecommunication Networks

The Fund will invest in formation of the world’s most advanced information and telecommunications networks. Funds will be allocated to
Building ultra-high speed internet network providing constant Internet access the country;
Creation of Broadband Convergence Network that will increase data transmission rate manifold and fuel the nation’s growth;
Building high-capacity and high-speed optical transmission backbone networks ;
Upgrading Internet speed in homes; introducing new technologies including cable modem and satellite data communication will be funded.
The R&D Fund Policy envisions and integrated network linking wireless LAN, mobile telephony, broadband Internet that will bring Pakistanis closer to “anywhere, anytime” communications and computing. The policy also targets rural connectivity and fiber wiring of commercial centers, business cluster and key industrial areas in Pakistan.

6.3.3 ICT Product Development

Policy Context

There is very little activity in Pakistan in the area of the production and development of ICT products. The majority of the ICT related companies and service providers trade in products and services with very little locally developed content. Companies retailing computer hardware import them as complete systems which they retail to public. Most of the application software (mostly standard off-the-shelf products) on the Pakistani market is also not developed locally.

Policy Objectives and Strategies

The objectives and respective strategies to be pursued through the Fund in the field of ICT product development are:

Objective A: Ensure ICT Infrastructure Support

The Fund will invest in
Development of a secure broadband information and communications infrastructure to support the development and provision of world-class off-shore ICT service in the areas like software development, financial services and other ICT services targeted at the export market
Ensuring that as far as possible, development is not constrained by inadequate transport, communications and energy infrastructures and networks

Objective B: Promote ICT Innovations

The Fund will invest in
Promoting the development of a world-class software development industry targeting both the domestic and export market
Development of local industry for the manufacture, assembling, repair and maintenance of computer and communication equipments and products
Development of innovative local content and applications in the area of information and communications technologies to meet the needs and requirements of the nation

Objective C: Identifying and developing architectures and standards for the local ICT Market

Objective D: Re-engineering the local industry

The Fund will invest in
Stimulating innovation within the ICT industry and sector as a basis for promoting growth within the industry, provision of quality of services and the development of advanced and reliable communications infrastructure
Initiatives targeted at organizational system renewal aimed at improvement on organizational structures, procedures and processes through the deployment and exploitation of ICTs
Modernizing the banking system and promote the use of electronic banking instruments in business transactions and de-emphasize cash transactions

Objective E: Facilitating initiatives in security and privacy requirements including service provision, transaction processing and systems.

The Fund will invest in
§ Ensuring that the development, deployment and exploitation of ICTs within the economy and society and related legal and regulatory provisions will balance and protect community and individual interests, including privacy and data protection issues.
Creating and enacting the necessary cyber-laws including those relating to: intellectual property and copy rights; data protection and security, freedom of access to information; computer and cyber crime and other cyber-laws, necessary for facilitating their country’s participation in the information age and economy.
Support the development of the necessary legal and regulatory framework that is consistent with international and national laws, regulations, technical standards, and obligations

6.3.4 ICT Market Development

Policy Context

The Government acknowledges that ICTs can serve as the engine for developing the services sector of the economy into a competitive regional business services hub and ICT hub to provide world class ICT services, in targeted off-shore, banking and financial services to business communities in the region and beyond. The Government is committed to putting in place the necessary policy measures and provides to facilitate this process.

Policy Objectives and Strategies

The objectives and respective strategies to be pursued through the Fund in the field of ICT market development are:

Objective A: Digitization of the administration and application of IT in other public areas

Acknowledging the crucial role that ICTs can play in the service delivery of Government services; bringing government closer to the people, this policy makes a commitment to deploy and exploit ICTs to modernize the operations and activities of the Civil and Public Services to facilitate administrative cost reduction and the promotion of effectiveness and efficiency in the delivery of government services to the people of Pakistan. To achieve this objective, the Fund will invest in:
Facilitating the delivery of modernized public services in the area of provision of government information and social services through the deployment and the exploitation of information and communications technologies within the society and economy
Promote the exploitation of information and communication technologies within the civil and public services to make public services more efficient, productive and accessible to the public at large
Implementation of relevant e-government programs and projects at the local and rural community level as a part of village information and communications infrastructure development

Objective B: Provide government services to stakeholders online

The Fund will invest in
Developing and promoting standards, guidelines and procedures to facilitate the acquisition, installations and maintenance of ICT equipment and systems within Government Ministries and other Public Sector institutions and establishments
Developing an e-government interoperability framework to facilitate cross-departmental operations of ICT systems and services
Implementation of e-government initiatives including: government to government (G2G), government to business (G2B) and government to citizens (G2C) types of government initiatives
Promoting the deployment and the use of ICTs to facilitate universal access to public and government information and services to support the promotion of the principle and practice of good governance
Encouraging information sharing, transparency and accountability and facilitate the process that will lead to reduction in bureaucracy within and between organizations within the civil and public service

Objective C: Promotion of web-enabled services

The fund will invest in
Locally developing web-based marketing services and data base management services including Email Marketing Campaigns, rapid response email, web surveys and search engine optimization, which contribute to generating revenue, increase customer satisfaction, and creation of a closed-loop information system for the enterprise by using integrated services and technology.
Locally developing a range of web-enabled services including transactions processing services (order processing, claims processing and loan processing etc), financial processing services (including invoice processing, billing services etc) and HR payroll services (employee record management, payroll outsourcing etc.)

Objective D: Facilitation of E-Commerce

The fund will invest in
Encouraging and facilitating the use of open electronic marketplaces, secure e-business solutions, electronic signatures, electronic public procurement and electronic payment services to support the development of electronic commerce in the country
Modernizing the banking system and promote the use of electronic banking instruments in business transactions and de-emphasize cash transactions
Implementation of relevant e-government programs and projects at the local and rural community level as a part of village information and communications infrastructure development

6.3.5 Multi-Sectoral Support Program

Policy Context

This policy statement makes a commitment to establish a globally competitive, diversified and balanced economy that is driven by information, knowledge and skills ----an economy with a modern, efficient and competitive agricultural sector; an ICT-intensive biomedical research and pharmaceutical sector; and a vibrant ICT-driven, value added services sector.

Policy Objectives and Strategies

The objectives and respective strategies to be pursued through the Fund in the field of ICT market development are:

Objective A: Agriculture Sector Development via ICTs and Effective Use of ICTs in Agro-based industries in making them globally competitive

The Fund will invest in promoting the deployment and exploitation of ICTs to support the activities of the agriculture sector including; the production, processing, marketing and distribution of agriculture products.
Facilitating the commercialization of the key sub-sectors of the agricultural sector an industry to improve their competitiveness
Developing Geographical Information Systems (GIS) applications to monitor and support sustainable environment usage in areas like land and water management, yield assessment and livestock management
Encouraging market research through the use of ICTs to improve access to established foreign markets and to break into new markets for both traditional and non-traditional exports
Utilization of ICTs to link farmers and farmers’ groups and associations to resources ad services that they need to improve their livelihoods through agricultural productivity, profitability and food security
Deliverance of real time information and customized knowledge to improve farmers’ decision making ability to align farm outputs with market demands, and to improve productivity

Objective B: Effective Use of ICTs in biotechnological research, pharmaceutical and health sectors

The Fund will invest in
Improving research competence and promoting the application and transfer of new technologies such as biotechnology, to support improved pharmaceutical production
Networking all healthcare institutions to collate information, share data and communication online
Restructuring the health care system by providing a national databank to support on-line national healthcare information, administration and management at primary, regional and tertiary levels
Promoting the use of Wireless Connectivity in Healthcare: Using satellite technology in making high quality healthcare available to the under privileged that are separated by large distances from quality health care.

Objective C: Using ICT for International Transactions Processing

The fund will invest in development of transaction processing systems with the capabilities of efficient data capture, high accuracy levels and on schedule delivery. The services in the transaction-processing segment which will be supported by the Fund, include
§ Finance/ Accounting Services: These include Invoice processing Services, Finance Outsourcing Services, Accounts Receivables/ Payables Services and Billing Services
§ Transaction Processing: These include Credit / Debit card applications processing, Account openings / amendments and audit checks, Claims Processing, Loans processing and Cheque processing
§ HR Payroll Services: These include Payroll Outsourcing Services and Employee Record Management

CHAPTER SEVEN
THEMES PROPOSED FOR IMMEDIATE FUNDING

This policy has defined broad objectives within each priority area to be pursued over the 5 years of life of the policy (Chapter 6: Roadmap for Implementation) and the strategies to achieve these objectives. The specific areas that will be invested in a certain time frame will be decided by the R&D Fund Board. This process of selecting new themes will be repeated each year in which the funding priorities will be determined in the light of Policy Roadmap. The policy also defines “Themes for Immediate Funding” that will be considered by the Board while selecting themes in the initial phases of Fund’s functioning. These are as follows:

1. Create awareness amongst potential stakeholders
2. Research to identify areas of comparative advantage for Pakistan
3. Research, development and support of an integrated GIS based national information platform
4. Operational support for web-enabled services
5. ICT support for textile industry
6. Provision of physical infrastructure (information technology parks) to facilitate collaboration of ICT industry and academic institutions
7. Human Resource development
a. Support industrial training activities to decrease the cost of Telecom infrastructure deployment
b. Implant industrial training activities in academic institutions
c. Evolve industrial training centers implanted in academic institutions to centers of excellence.
d. Provide needs based scholarships to students for ICT education.
e. Foreign graduate degree programs offered in Pakistan

7.1 Create awareness amongst potential stakeholders
The success of the ICT R&D fund depends upon participation by a large segment of the potential stakeholders. This is a very large and diverse group of people. A concerted effort should be made to proactively reach out all these segments by holding industry and interest group specific seminars, workshops, advertisements etc. The effort must primarily be aimed at the most promising participants; the academic community. The effort must be made not only to give a general awareness but also training in making effective and potentially successful proposals.

7.2 Research to Identify Areas of Comparative Advantage for Pakistan
In today’s global competitive environment each political entity has to find its niche. There are certain geographic, demographic, geological, climatic and other strengths each country has. On top of these natural attributes each nation has its own prevalent political, social and human development state. We need to actively fund research on identifying the areas where Pakistan has an edge in global competition. Ideally the thematic integrated approach must operate in the space identified by this research effort.

7.3 Integrated GIS Based National information platform
It is proposed that an integrated GIS based information platform be created and operationally supported by the ICT fund. This platform will contain detailed GIS information for the whole country. The quality, quantity and accuracy of the information should be such that applications like Map quest can be created for Pakistan. This information will be freely available to all.

7.4 Research, development and operational support for web-enabled services
Due to rapidly decreasing cost and increasing quality of telecommunications and networking services, millions of highly paid service oriented jobs are migrating from the first world to the third world. At the low end are the typical data entry, call center operator jobs and the high end jobs include financial analysts, legal advisors, technical support personal etc. These jobs add significant benefits to the economy including increase in the demand for ICT services, financial support for HRD infrastructure, induction of state of the art domain knowledge to name a few.

7.5 ICT support for textile industry
Approximately 75% of exports from Pakistan are related to production of cotton and value added products from textile industry. A thorough study of ICT needs of the whole textile industry value chain should be performed. The study should evaluate the current usage of ICT in Pakistan in each of the segments. This usage level should be compared with the use of ICT in textile industry internationally. Opportunities for improving the productivity of textile industry by more effective use of ICT should be identified and project should be initiated to avail these opportunities. This effort should be complemented by ICT research and development in Pakistan to produce software and systems to be used by the textile industry.

7.6 Provision of physical infrastructure (information technology parks) to facilitate collocation of ICT industry and academic institutions

The ICT industry is experiencing a significant rise in outsourcing of research and development activities to the 3rd world. Pakistan should position its self to receive a significant share of this out sourced research and development activities. We need to provide information technology parks at a subsidized cost to help make Pakistan an attractive destination for these jobs. Our academic institutions are facing a significant shortage of faculty with industrial experience. Similarly our industry needs a large number of senior technical experts. We also need to enhance the industry academia cooperation. It would be very useful to establish these new information technology parks physically near our academic institutions so that critically short resources can be effectively shared between industry and academia. This collocation is likely to lead to a fusion of ideas generated by academia and industry.

7.7 Focused Human Resource Development

7.7.1 Support industrial training activities to decrease the cost of Telecom infrastructure deployment
7.7.2 Implant industrial training activities in academic institutions
7.7.3 Evolve industrial training centers implanted in academic institutions to centers of excellence.
7.7.4 Provide needs based scholarships to students for ICT education.
7.7.5 Foreign graduate degree programs offered in Pakistan
CHAPTER EIGHT
PROCESSES TO ACHIEVE POLICY OBJECTIVES

The policy document sets priorities for implementation from short to long term. However in the face of rapid technological changes, new technologies may emerge and old technologies become obsolete in a very short space of time. This whole spectrum of uncertainty about the future preferences in the ICT sector urges the need to have an ecosystem that could align the policy roadmap accordingly. The shift in priorities, change in direction, recognition of new technologies and obsolescence could only be catered through an interrelated chain of processes. This policy recognizes that chain to be as follows:

1. Process to determine themes/areas for the R&D initiatives that would be industry driven
• The proposed initiatives are thematic and non-thematic
• Within the thematic initiatives, we will have short term, medium term and long term initiatives
2. Process to solicit proposals for R&D projects
3. Process to evaluate submitted proposals
4. Processes to allocate relative funds to R&D projects
5. Process to monitor funded projects
6. Process to make results of R&D projects available to stake holders

The process system will form a continuous cycle and the core objective is to create an environment that would have a proactive check on the policy direction in the face of diffusion of changing technology and business practices.

CHAPTER NINE
CONCLUSION

This policy document makes an attempt to draft the priorities and processes of the National R&D Fund in such a way that this new endeavor improves upon the previous research experiences in Pakistan and also takes into account international best practices of the present era.

The policy regards following four steps as catalysts that would enable the policy to achieve above mentioned vision: Enabling Government directives comprising of the supportive policies; Creation of a Legal System or regulatory framework that supports a globally connected knowledge based economy; Creation of a well trained and efficient young manpower and efficient and cost effective infrastructure.

In order to attain its vision of making Pakistan a knowledge-based economy and society, this policy lays down five key areas for investment; these are: HR Capacity Building, National Productivity Enhancement, ICT Product Development, ICT Market Development and Multi-Sectoral Support. For each of these areas, broad objectives and strategies have been defined in the policy to be achieved in certain time frames.

The policy also describes the necessary processes to be enacted by the National R&D Fund during its functioning.