ISLAMABAD: In a candid admission on the floor of the National Assembly, Minister of State for Information Technology and Telecommunication, Shaza Fatima Khawaja, revealed on Friday that no investment has been made in Pakistan’s telecom infrastructure over the past three years. The minister attributed the stagnation to the financial turmoil inherited from the previous government, which left the country on the brink of economic collapse.

Internet and VPNs Functional, Says IT Minister

During the Question Hour, the minister addressed concerns raised by PPP lawmaker Shazia Marri regarding sluggish internet speeds and the suspension of VPNs, which have disrupted access to apps like WhatsApp. Khawaja assured the house that internet services, including VPNs and WhatsApp, were fully operational. She urged Ms. Marri to provide specific examples of malfunctioning VPNs or industries facing issues, emphasizing that industries relying on fixed-line connections had not reported significant problems.

Blame on the Previous Government

Responding to criticism, the minister laid the blame for the telecom sector’s lack of growth squarely on the previous PTI government. She stated that the country’s inability to import critical telecom equipment due to frozen letters of credit and fears of default had severely hindered infrastructure development.

“Telecom infrastructure is entirely import-based. When the PTI government left in 2022, no one was willing to open letters of credit due to the looming threat of default,” Khawaja explained.

She also noted the absence of foreign direct investment (FDI) in the sector over the same period.

Hopes for Economic Recovery and FDI

Highlighting recent improvements in Pakistan’s macroeconomic indicators, Khawaja expressed optimism that stable currency rates, lower inflation, and reduced interest rates would attract foreign investment. “With these positive changes, we expect FDI to flow into the telecom sector, enabling us to improve internet availability and infrastructure,” she said.

Progress and Challenges in Connectivity

The minister outlined several developments to improve connectivity. Pakistan currently has seven submarine cables, although one has reached the end of its lifespan. The Africa-2 cable has landed in the country and is expected to become operational within months, boosting internet capacity. Additionally, the Pakistan-China optic-fiber cable has been operationalized, and plans are underway to connect submarine cables to Central Asian states via the Wakhan corridor.

Despite these advancements, Khawaja acknowledged congestion in internet services, citing a lack of investment, limited spectrum, and submarine cable capacity constraints.

IT Export Growth

Khawaja also pointed to a 28% increase in Pakistan’s IT services export remittances, which reached $1.86 billion in the first half of the current financial year. This, she claimed, demonstrated improvements in internet speed and usage.

Opposition Protest Halts Proceedings

Meanwhile, the National Assembly session was marred by persistent protests from PTI members for the fifth consecutive day. Opposition lawmakers disrupted proceedings by raising slogans, thumping desks, and pointing out a lack of quorum. Speaker Ayaz Sadiq, visibly frustrated, adjourned the session until Monday evening after failing to complete even the Question Hour.

The ongoing political turmoil, coupled with the challenges in the telecom sector, underscores the urgent need for sustained investment and policy reforms to address Pakistan’s digital infrastructure woes.

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Federal Minister for Information Technology and Telecomm­u­nication Syed Aminul Haque has said that the telecom sector needed to upgrade its infrastructure to improve the quality of its services in the country.

Talking to a delegation of Telenor, a Norwegian state-owned multinational telecommunications company, led by its executive vice president Jorgen C. Arentz Rostrup, the minister said the telecom companies should upgrade their infrastructure in the country in general and urban areas in particular.

Mr Haque noted that the IT ministry was providing 90 to 95 per cent subsidy for providing mobile and broadband services to un-served and under-served areas of the country. He said that enhancing digitalisation demanded addressing public grievances and expanding networking.

He said his ministry was actively working to remove all obstacles hindering development of telecom sector in the country so that Digital Pakistan Vision could become a reality. He said his ministry was working hard to reduce taxes on the telecom sector besides working to resolve issues related to the banking sector.

“Digital world needs innovation in all fields including e-commerce … without it, no one can compete with rapidly growing demands of the market,” Mr Haque said.

“As a record number of mobile phones and broadband subscribers grow in the country, so does the quality of services. Similarly, the digital world requires innovation in all areas, including e-commerce and day-to-day routines,” the minister said.

Speaking on the occasion, Mr Rostrup said Telenor had a commitment to be a key partner in Pakistan’s digital journey.

“Telenor is committed to supporting Pakistan in its next stage of digital growth. Together, we must incorporate new technologies to bridge the digital and connectivity divide in the country,” he said.

He said digital growth not only ensured sustainable long-term growth, but a future-ready inclusive society that met the digital needs of the people and businesses.

Telenor Pakistan CEO Irfan Wahab said that connectivity was the backbone of advancing society. “We are taking steps on a daily basis to improve Telenor services in the country.”

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The Ministry of Information Technology and Telecommunication has proposed that the government eliminate regulatory duties on telecom equipment imports, provide a tax credit for new IT graduates, simplify taxation in the sector, and reduce taxes on mobile phones in order to make doing business in the country easier.

Official sources told that the recommendations were discussed during a meeting between top officials from the IT Ministry and the Federal Board of Revenue (FBR). According to sources, the Ministry has divided the recommendations into priority one and priority two in order to help the industry and avoid affecting income generation methods.

The Ministry has suggested eliminating the regulatory tariff on telecom equipment imports as a top priority. A tax credit for new IT graduates has also been proposed in the same category. In the same vein, the government has recommended simplifying the tax structure for the sector, which is seen as a major roadblock to its expansion.
However, in order to achieve the digital goal, the Ministry has proposed lowering taxes on mobile handsets in category two.

A cut in mobile phone taxation has also been proposed by the Senate Standing Committee. The committee was informed that a mobile phone worth $500 is subject to a tax of Rs. 80,000. A tax exemption for laptops was also advocated by the committee. The FBR has been urged to lower the tax on imported phones, according to Secretary IT.

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Cellular phone firms have raised the rates for call and internet bundles once again. Jazz, Zong, and Telenor have all raised their call and data bundle prices. Companies have increased call and internet package rates for the second time since the minibudget in January 2022.

Companies have begun applying the new tariffs, according to shopkeepers and retailers. The companies’ super load has been increased from Rs. 50 to Rs. 100. The price of various internet and data packages has gone up from Rs. 10 to Rs. 25. Similarly, monthly call package charges have been hiked. Monthly call packages have increased in price from Rs. 40 to Rs. 100.The price of a weekly all-in-one bundle has been raised from Rs. 10 to Rs. 20.

The Pakistan Tehreek-e-Insaf administration passed a minibudget in January that boosted withholding tax from 10% to 15%, against the telecom sector’s wishes.

According to the Pakistan Telecommunication Authority (PTA), the largest telecom operator was previously authorised to raise package pricing, but in recent months, all other companies have been allowed to do so with PTA approval.

The authority has shared a draught of tariff regulations with cellular mobile firms; after the laws are implemented, CMOs will have to seek permission before raising call and internet package rates.

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The telecom industry said that advance income tax made mobile phone ownership and internet usage unaffordable, especially for low-income people. The telecom industry has now requested that the government cut the advance income tax in the budget proposal for 2022-23.

“The industry’s profitability was being harmed by the current 15% taxation, which hampered the business case for network expansions and service upgrades.” In a letter to the Ministry of IT and Telecom, the industry stated that “it impedes the affordability of mobile ownership and internet services, which are vital for the entire population in this age, as well as the country’s economic progress.”

Pakistan has one of the world’s highest telecom tax rates. The country has the second-highest telecom taxation in South Asia, at 34.5 percent, including 15 percent advance income tax and 19.5 percent GST. Finance Act 2021 cut advance income tax from 12.5 percent to 10 percent for FY 2021, with a promise to 8 percent from then on. The decision was reversed six months later, without proper thought for the long-term consequences.

The AIT rate has been raised from 10% to 15% under the Finance (supplementary) Act of 2022, bringing the total tax on over 193 million telecom subscribers to nearly 35%.

“As a policy, AIT under Section 236 of the Income Tax Ordinance, 2001 (ITO) should be gradually phased out because it disproportionately affects the subscriber base below the taxable limit, and efforts should be focused on more direct taxation measures aimed at laconic, rather than expenditure on an essential service,” the sector stakeholders wrote in the letter.

The telecom industry also urged the State Bank of Pakistan to lift the 100% cash margin restriction on telecom equipment imports.

“The telecom industry is completely reliant on its equipment to meet its quality-of-service and network-expansion commitments, as specified by our various licences.” The stakeholders stated that “telecom equipment is not a luxury item.”

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