P@SHA chief tells Senate body: Lack of clear policy on VPN, internet use is counterproductive

ISLAMABAD: The potential short- and medium-term economic impact of restrictions on virtual private networks (VPNs) are significant and lack of clarity on internet policy are estimated at $420 million dollars, with potential long-term damages surpassing $1 billion dollars, resulting from a reported decline of 30 percent of order booking.

This was revealed by Sajjad Mustafa Syed, Chairman Pakistan Software Houses Association (P@SHA) accounting for over 90 percent of Pakistani IT exports, while briefing the Senate Committee on Information Technology and Telecommunication, here on Thursday.

“While we respect and support national security objectives, we believe that the current approach of only limited the IP whitelisted registered IP’s and lack of clear long term policy on VPN and internet use, is counterproductive”, he added.

The IT and ITeS exports stand at $3.2 billion dollars as per State Bank of Pakistan's data, growing at a Compound Annual Growth Rate (CAGR) of 22.6 percent - one of the fastest-growing export sectors in economy; the largest employers of youth, empowering over 600,000 skilled labour force, and 2.37 million freelancers according to PAFLA and ADB report. Around 3.0 million households today are dependent on IT and IT-related exports. With consistent policies and stable infrastructure, this figure has the potential to reach $15 billion dollars by 2030.

Unstable internet connectivity, uncertainly about the use of VPN, jeopardises the very foundation of the industry. Reliable internet is not just a convenience; it is the lifeline of IT and ITeS businesses, and the only means available to us to export our services. Past disruptions have already eroded investor and consumer confidence, resulting in economic losses, and diminishing of Pakistan's global standing. According to freedomhouse.org, Pakistan scores 27 out of 100 in Internet Freedom, well below all our global competitor countries like India which scores 50, and Bangladesh, and Philippines (61).

As per FIDE reports, Pakistan incurs substantial economic losses due to internet disruptions, estimated at approximately Rs1.3 billion per day. Another estimate of 2023, accounts for a loss of $1 million per hour internet outage.

The potential short- and medium-term economic impact of restrictions on VPN is significant and lack of clarity on internet policy, with estimated losses of $420 million dollars. This conservative estimate includes $320 million dollars in direct revenue loss from reduced IT export efficiency, $20 million dollars in compliance costs for companies seeking alternatives, and $126 million dollars from a 30 per cent productivity decline among freelancers.

Conservatively, the short-term immediate losses to the IT sector from these announced restrictions and a lack of long term policy are estimated at $420 million dollars, with potential long-term damages surpassing $1 billion dollars, resulting from a reported decline of 30 per cent of order booking - a grim statistic.

He said stable internet infrastructure, including free access to VPNs, is indispensable for the industry. Stable and secure infrastructure is not a luxury, it is an essential tool for secure communication, data protection, and meeting global compliance standards like the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).

National security is a global concern and all countries in the world have mechanisms where digital terrorism is contained. The only whitelisting path taken by us is the path that is taken by economies that do not provide software and services to North America, EU, UK and the Middle East. The current whitelisting only VPN method is followed by Iran, Turkmenistan, North Korea, China & Russia. China and Russia are not IT export power-houses compared to countries of similar economic sizes, and unlike Pakistan they have a strong hardware industry to supplement their software growth. All other countries are far below our current IT exports. We need to follow the digital counter terrorism methodology of our main competitor countries, like Vietnam, Philippines, Ireland, India etc. so our industry enjoys the same infrastructure that our global competitors have, he added.

The current whitelisting only approach has the following risks.

First, digitally isolating Pakistan IT industry by reducing competitiveness; Second, direct loss of business of FORTUNE 1000 clients; Third, difficult, if not impossible to implement the new rules in the short- to medium term should there be changes required and furthermore limiting the access to only whitelisted companies; Four, clear and transparent long-term policy on the and control of the internet and use of digital tools use and in technologies so our industry and investors can make long term investments and commitments; and five, no intervention in critical infrastructure without involvement of the IT industry, the main stake holders of the internet.

He said that this is not just about restrictions on internet, it is about preserving Pakistan's digital future. It is about the livelihood of millions of households; it is about the future of millions of youth who are currently enrolled in computer science programmes of our country. It is about future economic growth and the economic freedom our great nation, he added.

Copyright Business Recorder, 2024