Telecom Industry’s Contribution to Pakistan’s Economy

The GSM Association, a trade assoication of GSM mobile operators worldwide, has released the preliminary results of a study prepared by Deloitte, which estimates that the mobile industry has created 220,000 high-paying jobs in Pakistan and accounts for 5% of its Gross Domestic Product (GDP) and approximately 6% of the total taxes collected by the Central Board of Revenue, as reported here. The study also found that Pakistan’s economy and society is benefiting from rising mobile phone usage and low tariffs, which lowers the cost of doing business and improves productivity, while helping families and friends to connect to each other at home and abroad.

Deloitte estimates that over a period of 10 years the elimination of the activation tax would generate an additional 132 billion Rupees (US$2.17 billion) in total tax revenues through the positive impact on the mobile industry and its spill over into the broader economy, above what the government would obtain maintaining the tax. The study shows that tax collections from the mobile industry would grow consistently year on year in the period 2007-2017 due to increased penetration and higher revenues.  Last year, mobile operators invested US$2 billion in Pakistan, 54% of the total foreign direct investment in the country, according to the Pakistan Telecommunications Authority.

These findings were released when GSMA CEO Rob Conway visited Pakistan in last week of March. “It is very important that the government of Pakistan sends a clear signal to the mobile industry and its investors that it will continue to help operators to connect the unconnected by eliminating the activation tax of 500 Rupees in the next budget,” said Mr. Conway, citing the Deloitte report.

Rob Conway, Chief Executive Officer of the GSMA, met in Islamabad with President and Prime Minister Shaukat Aziz. He also met with CEO’s from Ufone (Mubashir Naqvi), Mobilink (Zouhair Khaliq), Paktel (Guo Yonghong), Telenor Pakistan (Tore Johnsen), and Warid (Hamid Farooq), as well as the Minister of Telecommunications & IT, Awais Leghari, and Chairman of the Pakistan Telecommunications Authority (PTA), Shahzada Malik.

“By lowering barriers to connectivity, the mobile industry can connect the unconnected in Pakistan. The activation tax is a significant barrier for people looking to own a mobile phone and represents a constraint for operators seeking to expand into rural areas,” said Mr. Conway. “With 50 million mobile users and 30% penetration, Pakistan is now a leader in mobile usage in south Asia. The next step is to build on that achievement by eliminating the activation tax and securing further economic and social benefits for the Pakistani people.”