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How is Internet Shutdown Affecting the Technology Sector?

Explore consequences of internet shutdown on the technology sector.

Every time there is an internet shutdown in Pakistan, it is exposed to the world through the international media that it is a country that does not meet the demands of the digital age.

According to data provided by the State Bank of Pakistan, Pakistan’s technology exports have increased by 133% in the last five years.

These exports were only billion dollars in the financial year 2018, which increased to about 2.6 billion dollars in 2023.

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While Pakistan’s policy makers are focusing attention on the sector, setting ambitious targets for the sector and highlighting the overall export potential, the reality is that their initiatives have led to a disruption of the technology ecosystem. Potential and long-term viability is weakening.

The main reason for this uncertainty is frequent internet outages affecting one of Pakistan’s few economically successful sectors. Even if limited to certain social media platforms, should this internet shutdown continue? This is likely to have far-reaching effects on investor confidence, export growth and the country’s reputation in the global technology market.

Barriers to Investment

Growth in any sector attracts investors, especially one that can generate valuable foreign exchange in an economy facing inflation. But investors look for stability and potential when investing, especially capital that scales to new ventures that require innovation.

As the technology sector is changing rapidly and the need for uninterrupted internet supply is inevitable, arbitrary restrictions on the internet are a threat to local and foreign investors.

Outages thus make it difficult to ensure uninterrupted operation of digital services and continuous delivery of products to the market.

Although some organizations can temporarily avoid shutdowns by using virtual private networks (VPNs) and multiple wired and wireless connections, overall trust is compromised.

In addition, VPN and multiple connections are additional costs that competitors outside of Pakistan do not have to bear. As a result, not only are investor sentiments hurt, but competition is also lost due to high costs.

Also, when the internet is shut down without prior notice, technology firms are unable to meet deadlines, which not only results in financial loss but also affects their reputation.

For upstart technology firms and the freelancers who dominate the technology sector, an Internet shutdown can have devastating effects, as failure to deliver client work by a deadline can damage the firm’s reputation.

Negative Feedback

The negative impact of frequent internet outages creates a perception of risk among foreign companies and clients.

For example, although these companies may be attracted to Pakistani technology partners due to lower cost and better quality of products, they may also withdraw due to risk.

For sectors like software development, customer support and back-office operations where uninterrupted internet access is essential, such disruptions are deal breakers.

Uncertainty creates risk that many companies are unwilling to accept, especially large foreign companies that typically do not take risks in major technology contracts.

This reluctance of investors not only affects new business opportunities but also jeopardizes existing relationships.

Fixed-term contracts can include clauses that penalize service providers for downtime, while frequent Internet outages can lead to violations of service-level agreements, financial penalties, and ultimately loss of business.

Every time the internet shuts down in Pakistan, the international media exposes the world as a country that does not meet the demands of the digital age.

A negative perception of the country by the global media can be as damaging as an internet shutdown because it reinforces stereotypes that overshadow the positive things happening in technology in Pakistan.

Lessons from Past Years

The people of Pakistan understand very well that it is very difficult to remove the impression of instability and even after the situation improves, this impression will not disappear for a long time.

As with the deteriorating security situation between 2007 and 2015, the long-term effects on the manufacturing export sector are still present.

As violence in the country increased, foreign partners stopped coming to Pakistan while they preferred other destinations like Dubai.

Many saw the political and security risk as a deterrent and shifted their orders to other countries such as Bangladesh and India.

Such developments resulted in canceled export orders, reduced linkages with foreign supply chains and reduced investment, the long-term effects of which our country is still grappling with today.

Risks are lower in the digital world today than in other sectors, but the consequences of internet shutdowns or site bans are sure to have an impact in the coming months and years.

Arbitrary internet shutdowns are a self-inflicted wound for Pakistan’s technology sector while also undermining the country’s ability to become a hub for digital innovation.

It also has significant and far-reaching effects on investor confidence, exports and the country’s international reputation.

These internet shutdowns are drawing attention to the symptoms but not to the issues facing Pakistan which are destroying the country’s political economy.

Apart from this, these closures are having negative effects which are increasing the dissatisfaction in the society.

Continued restrictions on the Internet pose a direct threat to Pakistan’s exports and the wider technology sector and must be stopped immediately.

Also read this: Who Shutdown X in Pakistan and How?

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