Pakistan's IT industry is a symptom, not a market

The Cost of Perception

Muzamil opens by asking whether Pakistan’s IT industry can grow. The answer is complicated. Syed Ahmad spent time in the United States observing scale-ups and met successful Pakistanis building there. What they told him shifted his thinking. “They said, forget Pakistan,” Ahmad recalls. “Look at the top companies here. After 30 years, they’ve hit a ceiling.”

The ceiling is not talent. It is the weight of Pakistan’s image in global commerce. IT is different from manufacturing. You cannot batch a project and ship it from Bangladesh or Vietnam while keeping your contract in Pakistan. In IT, the relationship is long-term. The contracts are large: $10 million, $100 million, even billions of dollars.

“When they do country risk analysis, Pakistan is always at the bottom of every index,” Ahmad says. This creates a stranglehold. Companies that can work are blacklisted from the largest projects. The result: Pakistani firms negotiate at $1 to $5 million contracts while international firms land $100 million deals. That gap compounds annually.

Talent Exists. Aptitude Does Not.

The supply-side problem is equally real. Pakistan graduates roughly 25,000 IT students yearly, but fewer than 5,000 are export-quality, and only 1,000 to 2,000 can compete internationally. The reason is not the curriculum alone. The problem is selection.

“I’ve sat in university interviews for 100 candidates,” Ahmad says. “I can filter 5 or 8. From those, I check attitude, culture fit. But I don’t have the luxury of rejecting based on fit. I take the talent and build it.”

The root cause goes deeper. Pakistani universities have no aptitude screening. They accept students based on ability to pay. Professors, under financial pressure, cannot fail students, because every student represents tuition revenue.

By contrast, Ahmad recalls a Prime Minister scholarship program from 2008 that funded talented students from rural Balochistan and Sindh. That batch was transformative. “They came from tier-two cities, minimal English, but they were the smartest kids we saw. By graduation, they were ahead of every big-city student.”

Muzamil asks what changed. The scholarships stopped. “The government ended ICT R&D funding,” Ahmad says. There was a later proposal to restart it at 10,000 scholarships monthly, but it remained unfunded.

Why Freelancing Is a Disease, Not an Opportunity

Muzamil raises Pakistan’s ranking as the third or fourth largest freelance market globally. Shouldn’t that be a win? Ahmad is direct: “No. Being third or fourth at the world level in freelancing is actually a symptom of an underlying problem.”

The symptom shows the disease: talent is not being absorbed into the domestic market. The best and brightest, unable to find solid companies offering stable growth, turn to freelance marketplaces. They earn money, but they stagnate.

“I remember someone who made 3 million rupees freelancing 10 years ago,” Ahmad says. “Today, they’re making 1.5 million. The competition increased, and the skill set couldn’t improve much because they had no big projects to work on.”

The solution is not to celebrate freelancing. It is to fix the domestic market. India’s freelancers graduated into software consulting firms. Pakistan’s did not. Many eventually tried to start companies but faced barriers: lack of local demand, no monetization pathways, no enabling government policy.

The Demand Crisis: Government Budgets Are Broken

Muzamil asks about the demand side. Why do international projects flow elsewhere?

“Traditionally, there are two types of work,” Ahmad explains. “Work you attract internationally, and work you can do locally.” The balance in healthy markets is roughly 10 parts international to 3 parts domestic. Pakistan has almost no domestic demand. Why.

First, government digitalization budgets are inadequate. Second, where budgets exist, government-owned software firms grab the work, using their political position to win contracts. These firms have no incentive to build efficient models. They collect easy money.

Third, private companies cannot compete because they lack portfolios. You cannot win international deals without proof. You cannot build portfolio without domestic projects. The cycle is locked.

“AI, neural networks, data profiling, image tagging for machine learning,” Ahmad lists the emerging opportunities. “Hundreds of companies worldwide are working on self-driving cars. All of that needs human annotation. The projects exist. But private Pakistani companies have none of it.”

Where Digital Pakistan Failed

Muzamil brings up Digital Pakistan, the initiative that launched in January 2020 with high expectations. It faded by mid-year. What happened.

Syed Ahmad was part of it. “We identified two core agendas in Pasha, starting in 2016. Job creation at massive scale, and export growth.” Digital Pakistan took that on. “It did reach the masses, which was good. But it was isolated, one power center among many others in government.”

The problem: IT is a cross-cutting function, not a vertical. It touches every ministry. Telecom, roads, railways, healthcare. All depend on IT. But Pakistani bureaucracy is siloed. “Every ministry has its own direction. Each one is focused on showing something quickly.”

The lesson: sweeping industrial reforms happened in the 1960s under Ayub Khan. “Today we have textile at $12 billion in exports,” Ahmad notes. But knowledge economy reforms have never happened at that scale or seriousness. The structures required are different. The policies required are different.

What’s Next: STZ, 5G, and The Fight Against Red Tape

The PM Task Force has proposed Special Technology Zones modeled on Dubai’s free zones. “Rules that apply elsewhere don’t apply inside the zone,” Ahmad explains. Create ease of doing business. Attract talent. Export infrastructure.

The Prime Minister has now fast-tracked this. “Within a couple of months, you’ll see STZ proposals come forward.” Zones will open in Islamabad, Lahore, and other capitals.

On 5G, Muzamil notes that for years, Pakistan waited for spectrum allocation. “The auctions were running, the NAPs were running,” Ahmad says, referring to government delays. “But I’m seeing the right level of committee engagement now. Probably within a few months, this process will be streamlined.”

A Realistic View of Startups

The conversation turns to startups. Can Pakistan produce unicorns.

Ahmad’s answer is measured. “Pakistan is not ready to produce unicorns right now.” The talent pool is still rising. The founders are strong, but they are mostly expat Pakistanis or already-successful tech workers. Locally born founders lack exposure.

“When we talk about innovation, look at Japan in the 60s and 70s,” Ahmad says. “They copied products, did contract manufacturing, then moved to innovation. China started with contract manufacturing, copied brands, then developed IP, then innovated. It’s a gradual step upward.”

For Pakistan, startups can win locally or internationally, but neither is easy. Local startups face ease-of-doing-business headwinds. International startups require exposure most Pakistani founders lack.

The mature play is not unicorns. It is a balanced ecosystem: big software companies employing 10,000 to 20,000 people, mid-market firms, and freelancers. “When someone in the ecosystem gets successful and we blow it out of proportion, that’s when problems start,” Ahmad says. The pyramid matters. The top end exists but is small. The base must be strong.

Muzamil thanks Ahmad and closes. He emphasizes that this episode is essential viewing for anyone in IT or tracking Pakistan’s tech future.