Advent of Information Technology in PAk

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Chapter

Information Technology In Pakistan Introduction

3.0.1 Information Technology is the key enabler of change in today’s rapidly evolving

business environment. IT revolution has changed the life style of people in every part of the

world. It has eliminated the geographical distances and due to advance communication

facilities, the entire world can be viewed on computer screen by just a click of a button. IT is

the major contributor to the progress of the developed countries. The effective use of IT is an

essential element of competing in a fast-paced, knowledge based economy. IT ‘cross-cuts’ all

operational functions within the organization and acts as the fabric that knits together

business processes. Today governments and private companies around the world are working

on IT solutions required for their growth. This technology has emerged as a very fast growing

sector in Pakistan as well and obviously IT sector is a deep resowant sound. With continuous

and concerted patronage of the government, there has been unmatched development in IT

infrastructure in the recent years. The government, in the IT sector, is making sizeable

investments and a huge chunk of this budget is meant for human resource development and

provision of enabling infrastructure. Majority of the organizations working in Pakistan are

making use of IT to increase their performance but of course there is a performance variance

among different industries.

This chapter presents discussion on Information Technology status in Pakistan. It consists of

two sections. Section I examines IT history in Pakistan, Pakistani Government contributions

to support IT diffusion in the country, IT usage in Pakistan industry and Pakistan IT

infrastructure i.e. Pakistan’s hardware and software industry, status of Internet, E-Commerce,

Human Resources and Telecommunication in Pakistan. It also discusses growth and

potentials of IT in Pakistan. Section II first brings into prominence the importance of IT

usages in business organizations and then it leads to the core areas of research and discusses

IT usage in Pakistan’s Manufacturing and Banking Industry.

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Section I

Information Technology Status in Pakistan

Historical Development

3.1.1. Pakistan is a developing country. It got its independence on 14th August 1947 as a

result of the division from the former British India. It encompasses 796,095 Square. km

with about 152.53 Millions population9. Pakistan is the first 5 in GDP in Asia and top 10

in total economic development in Asia. It is the 7th most populace country in the world,

stands at 147th place in the literacy rate, 128th place as per the Human Development index

and 132nd position on GDP per capita basis among a total of 160 nations10.

Pakistan is on the wake of its progress. In development, adoption and diffusion of

technology, it has been facing the same problems like other developing countries. As it

depended on the technologies mostly transferred from the developed countries. At the

time of inception of Pakistan in 1947, there was no base of Information Technology in

the country. The office work was carried out manually and office documents were

prepared on manual typewriters. There was not even a single electric typewriter. Post,

telegram and telephone department (PT&T) established during British rule in 1885 was

already working in the areas that came under the jurisdiction of Pakistan. At that time the

only fastest communication link available was through telephone and telex.

The process of computerization in Pakistan started in 1957, when a company named

‘Packages Ltd.” started using computer for its work. It is considered the first company in

Pakistan, which started using computer11. In 1960 an IBM main frame computer was

installed in PIA for flight reservation and by 1967, there were about 17 mainframes

working throughout Pakistan in different organizations (Aslam, 2001).

9 www.pakistan.gov.pk 10 The Dawn, January 23, 2006. 11 Zaidi and Naeem (2001), “Growth of IT education in Pakistan”, Pakistan & Gulf Economist, September 24-30, pp 28. and www.moitt.gov.pk

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The IT met slow introduction in Pakistan right from beginning because in the initial

period of 1960s, the import of computers was not opened and it used to take almost two

years for a software company to get import license from Government of Pakistan. The

custom duties and other import taxes on computers/electronic items were also very high.

It was an era of mainframe computers and prices of computers were very high. Because

of high import taxes and customs duties, the purchase of computers was out of the reach

of even government departments with huge budgets (Mahmood, 2006).

In 1964, Water and Power Development Authority (WAPDA) took the lead and

established its computer center in WAPDA house, Lahore by installing IBM-360

mainframe computer. Then after the main commercial banks in private sector i.e. Habib

Bank, United Bank and Muslim Commercial Bank started acquiring computers to

regulate their banking work. Quaid-e-Azam University Islamabad, Atomic Energy

Commission and University of Engineering & Technology, Lahore and PIA-Karachi also

acquired IBM Mainframe Computers. At that time, International Business Machines

(IBM) was the biggest computer company in Pakistan and IBM-360 & 370 models of

mainframe computers were popular during 1960s & 1970s. A British computer company

named as International Computers Limited (ICL), also started selling mainframe

computers in Karachi, Lahore & Islamabad. KPT, KESC, Karachi Gas, PNSC, AIOU &

State Life Insurance Corporation were some of the organizations that purchased ICL

mainframe computers. National Cash Register (NCR) was the 3rd biggest IT Company in

Pakistan to sell computers especially the data entry machines at that time(Aslam, 2003).

In software development side in 1977, the first private software company “Systems

Private Limited”12 was formed by “Packages Limited” in Lahore. In 1980s, the personal

computers brought a revolution not only in the world but also in computing environment

of Pakistan. The technology was miniaturized and desktop computers were introduced

having cheapest technology (Ghauri, 2003).

12 www.systemsltd.com.pk, www.moit.com.pk, The Dawn, 02.04.2006

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As in the advanced world the governments had influenced the use of IT through its role

as investor, as a consumer, and as a strategist or a regulator, the government of Pakistan

too, after realizing the IT benefits, has been playing all these roles in the country.

Implicitly, through its investments and consumption activities, or exploiting through

“National Strategies”, the government has been trying to determine the pace of IT usage

in the country.

Imam(2002) demonstrates that as the advent of IT euphoria has taken over the policy

makers and masses in the world, in Pakistan too, realizing the global revolution in IT, the

Government of Pakistan liberalized the hardware & software imports in 1985. The

custom duties on electronic goods were reduced drastically due to which personal

computers flooded the hardware markets and people started using personal computers in

offices and homes. In 1990s, the P.C servers became stronger & stronger and started

replacing Mini & Main frame computers in offices. The network technologies started

flourishing and the Main frame & Mini computers started vanishing from the offices and

were replaced by P.Cs & P.C Server LAN environments.

In 1991-92, heavy custom duties on computers were completely removed. The real

quantum jump was experienced in early 90s, which can be termed as IT revolution in

Pakistan as satellite communication technology was introduced. In 1991, 90% telephone

lines were converted to digital. In 1995, Internet Service Providers (ISPs) started

providing Internet facility to Internet users and now with rapid growth there are more

than 132 ISPs in operation all over the country providing internet facility to more than

3,000,000 users13.

It is all in 2000s, that the government gave a lot of emphasis to IT Sector. New IT

educational institutes are opened and IT professionals are hired to impart IT training in

universities. Nationwide IT seminars, forums, exhibitions and competitions are being

arranged to create IT awareness among the people. Computer as a subject has been

introduced in schools & colleges. Cyber Cafes are opened to create awareness for Internet

13 www.moitt.gov.pk

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use. Telephone network has been enhanced and in rural areas, telecommunication

facilities are being provided through small exchanges and PCOs. Links between Pakistan

and other countries have been improved significantly (Imam 2002, Aslam, 2001a).

Recent Developments

3.1.2. As discussed, computer is introduced in Pakistan though in 1960s but its use was

restricted to scientific purpose and to some extent for processing of data relating to

traditional accounting, billing, payroll, and inventory control systems in very large

organizations. The massive computerization in the country started after 1980s when most

of the companies started using computers for their business growth. They started using

computer for other functional areas, in addition to the areas mentioned above. The

government started fully backing computer use at the same time.

The government of Pakistan is taking all steps to make Pakistan an IT super power by

adopting IT as a national program so as to enable personal and national growth. The

country’s current IT policy and action plans intend to involve all walks of life, e.g.,

industry and commerce, banking and insurance, finance, revenue, communication, media,

human resource development, and defense etc.(Rehman,2001).

The computerization in the country initially was monitored by the Ministry of Science &

Technology(MOST). The national focal point for IT, which was previously missing of

diffused, was rectified with the creation of new IT and Telecommunication Division in

March, 2000 under Ministry of Science and Technology (MOST). All IT related

organizations were placed under this Division. The MOST was constituted of two

divisions i.e. Science and Technological Research Division (S&TR) and IT & Telecom

(IT&T) Division. The S&TR Division was focused on Science and Technology areas

other than IT & Telecommunications. But in November 2002, a separate ministry for

Information Technology was created and IT & Telecommunications Division became a

part of Ministry of Information Technology (MOIT). The principal agenda of the

Ministry of Information Technology (MOIT) is, building Pakistan’s IT competency in the

twenty first century. Its major objectives are: Transformation to Electronic Government,

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Development of software Industry, Building a state of art Infrastructure and Development

of a qualitative pool of Human Resource14.

Ministry of Information Technology (MOIT) is the national focal ministry and enabling

arm of the Government of Pakistan for planning coordinating and directing efforts to

initiate and launch IT and Telecommunication programs for economic development of

the country. It is working on national agenda to have a sound and sustainable Information

Technology and Telecommunications base which will result in the socio economic

development of the country and the attainment of the vision for better Pakistan. The

Ministry is maintaining firmness and viscosity with the policy and achievements made in

the IT and telecommunications sectors since its inceptions and to cope with modern

challenges and meet requirements of the IT and tele-communications, the policy is

regularly updated. Many other departments/ institutions like Electronic Government

Directorate, Pakistan Computer Bureau, Pakistan Software Export Board, Pakistan

Telecommunication Authority, Computer Society Of Pakistan, Pakistan Software Houses

Association (PASHA)15 etc. are working side by side the Ministry of Information

Technology to help forward IT in the country(NET Mag Cover Story, 2005).

Pasha(2005) also discusses some more efforts of the governmental for uplift of IT in the

country. He argues that the IT has become the focal point of the government now. The

government has set up technology parks and IT boards in all provinces to promote

economic growth in IT enabled services sector. New IT institutions are also being

established in the country and separate IT directorate at each district level has also been

set up to diffuse IT in each department. The government has also started at mass level a

talent hunt program to attract IT experts to work for Pakistan. A handsome budget has

been allocated for the young graduates for local and overseas advance IT education and

training. To promote and implement e-Government concept, computer training and

education for every government employee has been made compulsory in federal

14 www.moitt.gov.pk 15 PASHA is a representative body of software developer of Pakistan. It was found in late 1992 by 9 software hoses and now have about 350 members national wide: www.moitt.gov.pk

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ministries and record of all ministries and departments is now being computerized on

priority basis.16 IT has now been inducted at all level of government.

To embark upon an aggressive program to improve efficiency and provide quality

services to the citizen of Pakistan, in line with their efforts to improving organizational

performance and achieve high standard of work ethics, P.T.A, C.B.R and S.E.C.P and

various other public organizations have started to automate all their operations. Key

projects landed include citizen online, electronic processing of internal files, e-filing of

income tax return, electronic government projects and e-Commerce networks. To provide

protection and enhance the confidence of users, providers and facilitators of information

services, legislation based on the recommendation of the working group comprising IT

and legal experts have been framed. Action in the area of digital signature act intellectual

property and copy rights act and the consumer protection act has been started(Kazmi,

2005, Ismail, 2003).

As argued by Osama(2005), the IT revolution is the fastest emerging revolution seen by

the human race and the Internet surpasses all. Electricity was first introduced in 1873 and

it took 46 years for its mass scale use, telephone introduced in 1876 and took 35 years for

mass use. Television introduced in 1926 took 26 years for mass use. PC introduced in

1975 took 16 years, mobile phone in 1983 took 13 years for mass use while the web

introduced in 1994 took only 4 years for mass use17. The IT revolution thus has given a

new vision of the future. It is estimated that in Pakistan presently there are around 2,100

mainframe and minicomputers in the country with nearly half of them are in the

Government sector. Liberal import policy and reduction/removal of duties have led to a

burgeoning usage of PCs and servers. It is estimated that nearly half a million PCs are

added each year, representing a three fold increase in annual volume over the decade

straddling the 21st Century. Analysts estimate that this rate of growth could very well

quadruple by the end of 2010. The Federal Government of Pakistan has laid great

16 A decision taken in the first meeting of National E-Government Council under president ship of Prime Minister of Pakistan Mr. Shaukat Aziz on April 27, 2005. (The Jang, April, 28, 2005). 17 Kofi Annan, Secretary General U.N, commented on 17th May, 2004, on world telecommunication day.

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emphasis on expedition towards the intensity of Information Technology in a variety of

fields.(Ghauri, 2003; Pasha, 2005).

Kazmi(2000) rightly noted that in Pakistan, IT is becoming a necessity. The market of

Pakistan today buzzes with IT activities and the current boom in IT dates back to early

1996 with introduction of Internet which opened up a communication channel between

Pakistan and rest of the IT world and there has been no looking back since.

To conclude all above, it can be said that the Government of Pakistan now is giving all-

out support and push to IT sector. Millions of dollars are being invested by the

Government in IT, and majority being spent on human resource development and

enabling infrastructure provision. The Government of Pakistan is leading the technology

revolution in the country in various projects aimed at improving infrastructure, human

resource development and integrating IT in the public and private sector.

Pakistan’s Information Technology Infrastructure

3.1.3 IT as discussed earlier today encompasses a wide range of areas and covers a whole

gamut of hardware, software, networking producers & services and telecommunications

technologies (William and Sawyar, 2005). IT thus is a hybrid technology that results

from a synergy between telecommunications infrastructure, software & hardware

development, standards and human skills. Infrastructure of IT sector in Pakistan consists

of following segments(Imam, 2002);

a. Hardware & Software

b. Telecommunication

c. Human Resources

As William and Sawyar(2005) comment that an established IT infrastructure is a

necessity for development of an organization and a country thereof, so is the case for

Pakistan development. All the developed countries have well established IT infrastructure

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and self-sufficiency in all IT tools but underdeveloped countries like Pakistan are still

striving to have most of them. Many developing countries lack the required IT and

telecommunication infrastructure to become true IT user. Therefore, to cope with the

rapidly advancing IT world during last ten years, Pakistan has been developing IT human

resource and necessary infrastructure. With the continuous efforts and patronage of the

government and private companies, IT is considered to be in the take off stage and is

catching up with the regional and global industry18. This technology has emerged as the

fastest growing sector in Pakistan now(NetMag August, 2005).

The ensuing discussion highlights the salient features of IT infrastructure of Pakistan. It

thorough light on all segments of Pakistan’s IT sector i.e. IT Hardware & Software,

Telecommunication, Internet and Human Resources.

Hardware Industry in Pakistan

3.1.3.1. Gupta(2000) defines computer hardware industry as “designing, development,

manufacturing and maintenance of all products, modules and components that form the

building blocks of an IT infrastructure”. A thriving hardware industry is pivotal to the

growth of IT infrastructure and services. Computer hardware manufacturing is extremely

capital-intensive industry. This is a relatively young industry, and is facing lot of

problems with regards to getting recognition in computer manufacturing in Pakistan.

Khan(2004) demonstrates that presently, there is no computer hardware manufacturing

activity in Pakistan in true sense. The reason is that imported hardware components are

available in abundance and on fairly cheaper rates. Especially after the emerging of China

as a big computer hardware manufacturer and supplier, the prices of hardware

components have been reduced. In this scenario, the computer hardware manufacturing in

Pakistan is currently not feasible. Khan(2001) further adds that hardware industry is

profitable if it works on economy of scales, which depends upon vast markets. In

Pakistan, the market is negligible for hardware consumption and it will not be

competitive with China, so this industry has not reasonable prospects in Pakistan to

18 “Pakistan to hold global IT moot”, The Nation, 23rd May, 2002.

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develop & flourish at present. Another researcher Ghauri(2006) argues that there is also

no much encouragement by the Government for consumption of locally manufactured IT

products as China. Mostly the computer vendors are assembling the imported parts and

components to produce the personal computers. Some companies like INBOX,

RAFFLES, MICRO PAK etc. have developed organized assembly lines and are

producing small components like casings of PCs. and M/s Enabling Technologies are

doing some hardware designing activity(Khan & Shah, 2004; Ghauri, 2006b; Money

plus, 2006).

Software Industry in Pakistan

3.1.3.2. Software is Information Technology’s Achilles heel. Software Industry in

Pakistan has developed a lot during last ten years. Due to liberalized IT policy, a

mushroom growth of software houses has been registered in IT sector. The Government

of Pakistan is taking very significant steps to develop IT culture in Pakistan and lots of

incentives have been given to software houses to start software business. In a short period

of three decades, computer science has developed from a branch of electronics to one of

the largest engineering disciplines itself. IT now consists of many branches and software

engineering is considered to be the largest. The reason for the rapid growth in the demand

for software development is lead by the widespread use of computers in everyday life,

evolution of high-powered general-purpose computers and low cost of maintaining,

debugging and duplication of software products. The potential in the field of software

development is still growing worldwide and is expected to continue to grow for decades

to come19(Imam, 2002).

The computer software can be grouped into two types i.e 1) Systems Software(Operating

systems etc. and 2) Application Software(Business programs etc.) (Shelly et.al, 2004). In

Pakistan system software for micro, mini and mainframes comes largely of the packaged

variety from the vendors who supply hardware to the companies or in some case these

software are imported directly from the producing firms, which all are based in developed

countries. Except one or two (Urdu version of a typing software), most of the operating

19 “Software exports booming”, 2001, The Business Recorder, 31st May, 2001.

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systems and languages/packages are being imported from developed countries. As far as

application/business software development is concerned, there are lot of development

activities in Pakistan. According to conservative estimates, there are about 660 software

houses based in Pakistan which are busy in developing and exporting software to the

developed world in areas as diverse as database management, Internet applications, e-

Commerce, CAD/CAM management systems, etc. The fields in which these companies

are involved are virtually unlimited. More and more opportunities are being thrown open

to them every passing day as their skills, potential and strategic advantages are getting

accepted in major software markets around the world including but not limited to USA,

UK and the rest of Europe, South Africa, Japan and Australia20. But this is only the tip of

the iceberg, as vast potential still exists for the local IT industry to become a formidable

force in the global arena. So the Government is taking all possible measures to spur

activity in the IT sector and the framework is now more conducive than ever before for

investments in the sector.

The software industry has become one of the fastest growing industries in the world,

capturing billions of dollars in the global market. Its contribution to the socio-economic

development of the country is also very significant, especially for the developing

countries. So realizing this importance of the Software Exports, the Government of

Pakistan has established Pakistan Software Export Board in 1995, with main objective of

encouraging software exports in the country. Taking a step further the Government

declared the Computer Software Information Technology as “Industry” by a notification

in March 1997. The Software Houses, though established in the 80s, but software market

in Pakistan came in the limelight in early 1996 with the introduction of Internet which

opened a communication channel between Pakistan and rest of the IT world (Khan and

Shah,2004).

The Government of Pakistan has extended very liberal fiscal and monetary incentives for

software exports. With the efforts of PSEB, software exports are now picking up and it

20 Federal Bureau Of Statistic(2002), “Census Of Software Industry and related services of Pakistan”, reproduction and printing unit, FBS, Karachi, Pakistan.

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has gone up to US$ 32.88m during 2003-2004 from US$22.62m during year 2001-200221

and it has further grown upto US$ 48.50m during 2004-2005 (Ayub, 2006). This vibrant

sector has set an export target of $70m during the current financial 2005-2006 year22.

Ahmad(2005) estimates that Pakistan has worth US$50-100M software industry and this

software growth in the country has been contributed to the liberal and supportive polices

of the government. Ismat and Hasan(2005) say that the ability of Pakistan to produce

quality software is 1) its abundant pool of IT professionals 2)emphasis on software

quality and well-managed processes. Currently though a few software companies have

either ISO 9000 or CMM(Capability Maturity Model) certifications but this number is

being increased. The quality of Pakistan's IT technicians is not always of the desired level

because a number of substandard training institutions claiming to be training people in IT

have mushroomed all over but they actually teach very little. However, the government is

aware of these constraints and deficiencies and is trying to remove them to improve the

overall training facilities (Khan, 2005).

Since the declaration of the IT sector as an industry, the Government is giving significant

benefits to this industry to promote investment and it has positive results. Although some

of the top names like IBM, NCR and Siemens are present in the country for decades, the

world wide boom in IT, especially in the 1990s spurred investment by many other

companies from North America, Europe and the Middle East. These companies were

looking for a well-fitted environment for their operations at a lower cost margin. In

Pakistan they have found a suitable climate with highly qualified individuals to help them

grow their businesses internationally23. Ghauri(2006b) says that companies are making

heavy investments to benefit from emerging technologies in hardware, software and

communications areas. As a result Pakistan in recent years has seen considerable growth

in its IT sector. It is at the forefront of this industry with more than two million computer

literate people and a state of the art infrastructure. But a researcher Kolachi(2004) argues

21 1. “Fifteen year IT relief to software exports(2001), The Business Recorder, 21st May 2004. 2. “IT relief to software companies to help boost forex earnings(2005), The Business Recorder, 18th May. 22 These are estimated figure of PSEB, as State Bank of Pakistan claims with reference to PSEB that since export of IT is not carried out through the formal letter of credit. 23The Business Recorder “Private sector urged to play role in promoting IT(2001), 6th May, 2001.

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that at the same time a lot more than innovation is required for strengthening the

computer software industry. The Pakistani IT industry centers on a strong national

revolution towards developing the country as a major player in the international forum.

Support programs from the Government coupled with an established private sector are

creating many opportunities for realizing this goal. IT professionals trained in a variety of

disciplines from abroad and locally are applying their innovative ideas to maximize the

benefit obtained from the information revolution24. More and more international

companies are seeking solutions from Pakistani professionals to remain competitive in

the global economy. Kolachi(2004) with the shrinking global scenario suggests that,

Pakistan urgently needs to further revolutionize its IT sector.

Another researcher Ghauri(2006b) is also of view that there is more need to improve

quality of Pakistani software and timely completion of projects. In his recent survey on

Pakistani software usage, he found that some companies are reluctant to use Pakistani

software because in few systems, there were horrifying statistic for the number of

software systems which are delivered too late for use or with so many bugs (errors) that

they are unserviceable or a proportion of the systems do not carry out the task for which

they are designed. Ghauri(2006b) says that the fault lies both with the software industry,

which is still an amateurish, craft-based discipline, and with the customers who rarely

know what they want of a computer system or how to specify it. Much of the

dissatisfaction with IT is the result of software-late, inappropriate or useless and there is

need to overcome these problems he adds. Hydir(2006) notes that with all efforts of the

government and private concerns, though the use of Pakistani business software is

increasing both in local and foreign market but still the industry is tended to consolidate

into a few large multinational companies, which are having most of the software industry

share.

Internet Status in Pakistan

3.1.4. The Internet has been described as a “Network of Networks” or as a “Loose

collection of related computers networks” (Kendal and Kendal,2000). Measurement of

24Pakistani software Company named NetSol Ltd is also listed on the Nasdaq stock exchange.

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internet diffusion are usually based on several indicators such as : Connectivity, number

of hosts, no of websites, number of users and other compound indices(Willam and

Ronalds(2000).Based upon these indicators the following discussion gives us true status

of Internet usage in Pakistan.

Hussan(2005) has investigated that though Internet entered in Pakistan in 1995 but it got

real boom in the year 2000 when the government started backing e-Economy in real

sense. Cyber Net and DIGICOM both are the first Internet Service Providers in Pakistan,

which were established in 1996 and can rightly be termed as the most proactive ISPs in

the country. Over the last one-decade, several others like Brain Net, COMSATAS, WOL

Net, Pak Net, Cyber Net etc have joined the fray. Today, about 1900 cities of Pakistan

have been connected through Internet. About 138 companies have been awarded ISPs

license, and are providing Internet connectivity and other web-related services in the

country. COMSATS Internet Services also took an initiative to train and transfer the IT

workforce of Pakistan in Cisco Network Training.

The growth rate in Internet and information services in developed countries is

unprecedented, varying up to 100% per annum, depending on socioeconomic level. The

Internet growth rate in Pakistan is 30%, whereas IT growth rate is estimated at 40% p.a.25

Today more than 2.426 millions people of Pakistan can access Internet and other

information networks of the entire world27. Access to medical, research and university

databases etc is of very high value. Latest information can be quickly retrieved and down

loaded from remotest corners of the world. It is necessary to share information, on best

practices of development, usage of information and communication technologies between

public and private sectors. Pakistani government also estimates explosive growth and aim

at information network capacity(Ismail, 2003, Khan and Shah, 2004).

The IT market in advance countries like USA, Canada, UK, Germany, Australia, Japan

and Far East has matured and still growing faster. The E-Mail and Internet network

development in Asia region continues to be still slow. However, developments efforts 25 Minister for Information Technology, The Jang, 15th May, 2005. 26 World wide internet user reached 1b, India has 6M and China has 100M internet users. C.N.N 17/01/05 27 www.bbcurdue.com

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around the region demand for added capacity, increased access and better network to

support new services for Internet users. Around the globe IT and telecom products and

services are in heavy trade. This volume is estimated to be over US$ 1000 billion p.a.

around the world. The IT growth rate is about 50% p.a. (compounded annual growth rate

including growth in Internet.28

Keeping international telephone and Internet access statistics in view, Pakistan still has

low access to information network. Today global ratio of public access to telephones

compared to Internet is about 12:1 which is improving every year. While looking at the

information society in Pakistan with a vision up to 2010, it is anticipated phenomenal

growth in computer terminals, multi-media, and information terminals and in allied

fields. The deregulation policy and participation by more than 50 private sector licensees

in data and Internet services with large number of equipment vendors is expected to

accelerate growth and awareness in the society.29

E- Commerce status in Pakistan

3.1.5. E-Commerce stands for electronic commerce. It is new way of doing business in

this IT revolution world where physical boundaries have no meaning. E-Commerce offers

many inherent benefits. It enables trade efficiencies by eliminating the delays, helps cuts

the documents costs by allowing trade partners to exchange transaction data digitally and

reduces errors to increase productivity and efficiency. Most importantly, it removes

geographical barriers to have a real time online access to international markets at

affordable costs(Laudon and Laudon, 2005; SAMEDA, 2005).

Choi(2001) argues that a firm that employs IT, and especially real time networking in its

various activities is called e-business firm. Thus most firms will qualify as an e-business

firm in its broadest sense. E-business firms include not only those that sell products

online but also those that use computer and network technologies in their manufacturing,

operations, supply chain management, marketing, sales automation and customer support.

28 “Internet May offer Boost to developing Countries”, The Dawn, May 9, 2001. 29 “Turning Internet promises into profits” The Dawn, May 9, 2001.

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In short, he says that any firm that applies digital technologies and networking to

organize it and manage its business operations and relationships is an E-business firm.

Rab(2004) demonstrates that commerce on the Internet reached $3 trillion globally in the

year 2003. Many countries have yet to draw up a proper set of operating principles to

govern legal, regulatory, and enforcement issues. With the emerging dot.com culture in

Pakistan, there has been a mushroom growth of information web portals, specialized

search engines and commercial websites in the last couples of years. The number of

Internet users in Pakistan is constantly increasing and is likely to soar manifold in the

next couple of years. Internet Service Provider Association of Pakistan (ISPAK) claimed

that the by the end of year 2005, number of Internet subscribers have reached about 2.4

millions and there are about 4.0 millions e-mail accounts, and current number is much

more. There is huge decline in bandwidth rates for high speed internet services across the

country and this will help in the growth of broad band subscriber. On IT infrastructures

side, as on November 2005, 1900 cities and towns have been connected to Internet via

local PSTN loop30.

The Government is taking all measures to promote commerce on Internet. As

Mujahid(2003) pointed out that Government of Pakistan has been on the forefront to

trigger the IT and E-Commerce revolution in Pakistan through virtual and distance

learning and e-commerce enabling initiatives. The most jutting out E-Commerce

initiatives taken by the Government of Pakistan are as follows:

- An establishment of E-Commerce working group and E-Commerce cell at the

Ministry of Science and Technology (MOST).

- Facilitation of Internet merchant accounts by the State bank of Pakistan

- Legal recognition to digital signatures and electronic documents, records,

information, communication and transactions.

30 www.ptcl.org.pk , Aslam(2002) , PTA Telecom status report 2003-2004, 2004-2005 & Khan & Shah(2004).

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- Protection of the intellectual property rights through Electronic Transaction and

Governance Ordinance31.

- Electronic Fund Transfer (EFT) through 2000 branches in major cities.32

Farooq and Mahmood(2005) argue that with an E-Commerce plan envisaged by the

government, the financial sector will become the springboard for developing b2b E-

Commerce in Pakistan. The plan takes an aim for an E-Commerce network, known as

EC-Pak Network services to connect about 2,487 branches of 25 local banks and all

foreign banks, in 12 big cities of Pakistan. All these banks will be linked to the State

Bank of Pakistan and, to public and private stakeholders such as the tax collecting

agencies, provincial governments, national saving centers, post offices, utility companies,

government bodies, money changers, trading houses, airlines, shipping lines, clearing

agents and insurance companies. Hence EC-Pak will allow stakeholders to communicate

with each other and it will provide specialized value-added services essentials for an E-

Commerce such as security, message distribution, audit trial, acknowledgement and other

related services that are more extensive and more advance than provided by a

conventional Internet Service Provider (ISP) (Khan, 2001).

Kazmi(2004) posits that although a lot has been done to promote E-Commerce in the

country but still much more is expected in this regard. He while narrating the E-

Commerce status in Pakistani banks says that though 1-Link net (ATM network of all

banks except MCB) and M-NET(ATM network of MCB) links are connected since

March 16, 2004. Still lacks of other E-Banking facilities have become a serious constraint

in achieving the ultimate objective of E-Commerce and Pakistan has not been able to

establish the network to facilitate E-Commerce in its true spirit. Kazmi(2004) terms this

slow pace to the low literacy rate, lack of reading, research and development, still high

cost of computers, lack of basic understanding of how-to use Internet, lack of

entrepreneurial spirit, unstable economic, political and legal environment, absence of

regulatory frame work for E-Commerce and absence of interactive websites which allow

31 Electronic Transactions Ordinance 2002, Announced by President Pervaiz Musharaf on 11-10-2002. 32 “Pakistan May do well to join E-Commerce”, The Dawn, May 9, 2000 & The Dawn, January 23, 2001.

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E-Commerce transactions. Rizvi(2005) rightly points out in this regard that it is true that

Pakistani Government taking some steps already and people in Pakistan are learning fast

to use the IT but still there is a need to act more quickly to over come all barriers. Table

3.1 provide a brief overview of Pakistan’s IT industry status upto December, 2005.

Telecommunication Status in Pakistan

3.1.6. Telecommunications today is a product of technology and politics. The first

electronic telephone switching was installed in the United States in 1965. It used a

computer for control. In the past 25 years, computer hardware and software have driven

telecommunications networks to dramatically increased speeds, capacity and functions.

Business demands for data communications began to grow in the early 1970s. At that

time the fastest rate at which data could be transmitted was 1200 bits per second.

Table 3.1: Pakistan’s IT Industry Status

Source Pakistan & Gulf Economist, December 5-11, 2005. pp 11.

Now a combination of transmission media-terrestrial copper cable, microwave radio,

satellite and optical fiber has removed the earlier constraints of cost and speed that helped

up the large scale commercial use of telecommunication. For the business user, several

kinds of network and communication links have to be considered including LAN, WAN,

MAN, ISDN, DXX, DSL, RADIO and VSAT33 etc(Cane 1992).

33 VSAT: Very Small Aperture Terminal. This proprietary network is based upon satellite technology.

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The other censorious element shaping IT is politics, the regularity control exerted over

telecommunication. Here there are many market differences between countries. In

developed countries, telecommunications regulations were traditionally aimed at the

provision of the universal service through a network controlled by one regulated

company, the advantages of innovation, competition and freedom of choice being traded

for social equity, integration and integrity of the network. The approach is changing now,

countries like USA, Japan,U.K with passing the reforms laws, have liberalized their

entire telecom infrastructures. The innovation and development in ICT’s over the last

decade have changed the face of the Telecom business globally. As a result,

telecommunication sectors world over are confronted with new challenges of

restructuring and are working towards incorporating the latest technological change to

keep pace with the changing time(Choi, 2001).

Pakistan at the time of its inception in 1947 owned a meager telecom base with just 7000

telephone lines. Telecom service was meant just to meet the needs of country

administration. The year 1962 saw the first big sector change when Post Telegraph and

Telephone services were separated by establishing independent T&T and Postal

Departments. Since the mid-1980s, a number of countries including Pakistan overhauled

telecommunications sector, to arrange / mobilize additional capital, improve performance

of operating enterprises and respond to rapidly growing pressures for more varied

services. The pace and scope of sector reforms have varied considerably in South, Latin

America and Asia. A number of countries opted to privatize their telephone entities. In

the Far East (early 1990s) there have been initiatives on partial privatization (Thailand &

Malaysia etc) including liberalization of non-basic services. The results achieved were

found to be beneficial. This brought the wave of change in South Asia also. To begin,

Pakistan in 1990 also started taking gradual sector reform measures within the existing

legal and regulatory framework. In line with emerging trends, private sector participation

and deregulation initiatives were taken in between 1989-199134.

34 “Private sector urged to play role in promoting IT”, The Business Recorder, 6th May, 2001.

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Pasha(2005) discloses that the current strategy of government of Pakistan is like the

advanced countries, which includes the restructuring of the telecommunications sector to

improve its performance. Therefore, efforts are being made to eliminate constraints on

the development of the economy. The government of Pakistan is continuing to encourage

private sector and awarded licenses for cellular, pay phones and paging services. By these

efforts some improvements have became possible in the availability and quality of

telecom services followed by revenue growth. The PTC Act of 1991 opened the venues

for new entrants in telecom service market. Some non-basic services are given to private

service providers. Since 1991 the Ministry of Communication started granting operating

licenses also for data and Internet services and removed controls on telecom terminal

equipment manufacturing. Khan(2005) also reports that this trend is still continuing.

Private sector is encouraged in the sector development including some new telephony

services, either through licensing or by outsourcing. One of the major milestones is

achieved (in restructuring the sector) by introducing the new legal framework in the form

of Pakistan Telecommunication (Reorganization) Ordinance, which was later enacted by

the Parliament with some amendments as an Act in October 1996. Today, this new law is

governing the telecommunication sector in Pakistan and under this law the Government

has privatized PTCL, to help inject private capital and skills into the mainstream service

business.

Now the Ministry of IT is responsible for policy and sector monitoring of telecom sector.

The Pakistan Telecommunication Authority (PTA) assumed the responsibility for

regulation of the telecom sector. Frequency Allocation Board (FAB) was made

responsible for frequency spectrum management and its monitoring. National

Telecommunication Corporation (NTC) was established to provide telecommunication

services to public sector (govt & defense) organizations. Pakistan Telecommunication

Employees Trust (PTET) was created as a trust to takeover statutory function to disburse

pension and other benefits to the employees of the PTCL. Pakistan Telecommunication

Company Limited (PTCL) was incorporated as a public limited company under the

Companies Ordinance 1984, with the principal object of provision of domestic and

international telecommunication and related services. About 95% of the assets and

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liabilities of PTC, at net book value, were transferred to PTCL whereas the remaining 5%

assets were vested in PTA, FAB, NTC and PTET(Aslam, 2002b; Rehman, 2002).

In 2003, Pakistan’s economy has witnessed yet another year of exceptional growth and

telecom sector has acted as a catalyst for it. Pakistan’s government has declared telecom

as a priority area for the inflow of foreign investments, provision of employment, better

telecom services to the people and reduction in poverty in the country. To materialize this

end telecom sector was liberalized in 2003 and since then a number of multinational

telecom operators have started investing in the country35. For the years, Pakistan’s

telecom sector has plodded along, seemingly stuck in the mid-20th century. From 2.1

phones per 100 Pakistan in 1999, the number of fixed lines has caught up to just 3.5 per

100 today. And while cellular has been more dynamic, only about 20% of Pakistanis have

cell phones. Mobile subscribers reached about 30 millions at the end of August 2006,

whereby total mobile penetration reached 17.16%. The mobile sector thus grew by

195.6% in one year, which is the highest ever annual growth in the history of Pakistan’s

mobile sector. Since July 2003, PTA has handed out more than 200 fixed, mobile and

long distance licenses to different companies. More than 360 cities all across the country

are covered by mobile operators’ services(Netmag-September 2006).

Share of telecom sector in the gross domestic product has also touched 1.9% last year.

Teledensity of Pakistan Jumped to 13.67%(August 2005) breaking a record of percentage

growth of 105% in just one year. Total investments made in telecom sector after

liberalizing is estimated to be US$ 1.02 billion till the end of year 2004-2005. In 2004-

2005, telecom sector remained one of the major contributors in governmental revenue

and the government collected Rs 20.5 billions as GST/CED from the sector36. Similarly,

approximately 202947 direct and 233266 indirect employment opportunities were

created during the year37. Share of telecom in GDP reached 1.9%. The pace of its growth

is more than 100%. (Bhatti, 2006; Sargana, 2006).

35 Growth of Telecom sector in 2004: The News International, Wednesday, January 26, 2005. 36 Pakistan has won the “Government leadership award 2006” for rapid progress in the field of telecommunication. After Brazil, Pakistan is the 2nd country to receive the honor(The Dawn Jan 28, 2006). 37 Pakistan Telecommunication Authority online quarterly report 2005.

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Pakistan Telecom Authority (PTA) has shown concerted efforts to make this sector

fastest growing in the region. While turning liberation into reality, PTA was faced with a

number of challenges. The Authority however was fully prepared to successfully go

through this transitional phase. The authority took diversified steps to enhance

competition after the implementation of deregulation polices by providing all facilities

and conduce environment to private entrance. Keeping in view the huge untapped

potential that this sector offers for growth and encouraged by a vibrant growth and

enormous development over the last few years, PTA proposed to the Government to

award “industry” status to the telecom sector. The government very positively responded

to PTA’s proposals and the sector was declared as an “Industry” in 2005 with the aims to

bring certain benefits allied with this status, such as borrowing of foreign companies from

local market, no minimum investment requirement for manufacturing, subsidized utilities

etc.(NetMag-November 2005).

Following its liberalization policy Pakistan has ultimately privatized its national

telecommunication services i.e PTCL in 2005. Though, in 1994, 12% shares of PTCL

were sold through capital market, while Etisalat a U.A.E based company won bid of

PTCL on 18/6/2005 for purchase of 1.3 billion shares(26 % of total share) of PTC @

$1.96(Rs 117) per share, with PTC’s controlling management rights. The Etisalat after

finalizing the payment schedule with government of Pakistan has taken over charge of

PTCL since 12th April, 200638.

Rab(2005) says that Pakistan likes to promote a business-oriented policy to associate

private entrepreneurs in telecom sector. The options are based on interconnect and

revenue sharing arrangements with licensed operators or through rebates and markup in

outsourcing contracts with private sector operators. PTCL has successfully entered into

collaborative arrangements with foreign and local telecom companies. The Information

Technology and global super-highway network is opening up new possibilities for the

38 Etisalat-PTC deal finalized: PAGE- March 20-27/2005 & DAWN 3 April, 2006.Money Plus Nov 28, 2005-“What’s scaring Etisalat”,

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future of telecommunication the world over. Pakistan did lag behind in this area but now

it is improving fast. The most advanced telecom network owned and operated by PTCL

now, which can help the society. Major initiatives have been taken to liberalize telecom

and Information Technology market of the country. The Information Technology &

Telecom Policy stresses the importance of building sophisticated infrastructure to face

the challenges of Information Technology of the 21st century.

The IT infrastructure covers most part of the country by using fiber optic channels,

satellite systems and digital switches to create a strong, permanent and reliable IT

infrastructure. This infrastructure will support private players in IT and Internet area.39.

PTCL tariffs have been reduced keeping business needs in mind along with the future

competitiveness of telecom giant. Recent modifications in the hierarchy of PTCL own

ISP, PakNet, also bode well for the ISP industry in general, with the positive change

being made in ISP with the widest national outreach. Competition among ISP’s is sure to

rise, leading to improving better and quality of service for the consumer. Internet

bandwidth consumption, internet access via ISDN, DSL, services, CDML, GPRS etc. are

just some of the technologies that have either grown exceptionally in Pakistan or have

had a favorable reception by the local consumers(Hydir, 2006).

The success story telecom sector has been recognized world over and Pakistan has

received GSM award of government leadership among 60 regulators of the world in 2006

and ITU awarded G-Rex award to PTA, which is the testimony of its success (Sargana,

2006).

Internet Infrastructure

3.1.7. Rizvi(2005a) argues that international telecom traffic has almost been doubled in

last three years (726m-minutes in 1998/99 to 1250 m-minutes in 2001/02). Initiatives

were taken to increase the network capacity through up-gradation of SEA-ME- WE-340

from 0.4 m to 2.8 million MIU kms. The Pakistan second cables SEA-ME-WE-4 has also

39 “P.T.C.L introduced new value added services”, The Business Recorder, 21st May, 2001. 40 South, East Asia, Middle East, Western Europe-PTCL 38000 KM long submarine trunk cable which allows internet links of Pakistan with rest of world. Pakistan is member of consortium financing the cable.

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started operating since January 2006. Two more optic fiber cables are also planned to be

laid down in this year in private sector.(One by TWA Transworld Associates (Pakistan’s

first private undersea optic fiber cables operator-TWA-1 has landed its cabling station in

Karachi which has also started working to meet the urgent need for reliable international

connectivity)). Pakistan has direct bilateral arrangements with 52 countries, whereas

connectivity to remaining countries is through transit arrangements. Pakistan is offering

Internet dial-up access (local call of no time limit) for Universal Internet using numbering

scheme e.g. UIN (131-XXXXX).Rapid expansion of ISPs resulted in small enterprises, to

date 85 ISPs have planned services using 131 Access-Code & 65 ISP’s are in actual

service(NetMag,Feb 2006).

The Internet bandwidth obtain ability in Pakistan has increased from 35 Mbps to 410

Mbps in last three years. An educational Intranet ranging from 256Kbps to 6Mbps has

been initiated for 56 HEC accredited universities. In addition to the local content, an

aggregate 4 Mbps international connectivity (up-gradable to 32 Mbps) will also be

provided. Optical Fiber Cables (OFC) have been laid for 16 universities, out of which six

universities are ready for using Intranet/Internet facilities.41.

About 70% reduction in long distance (NWD) and international call rates has been done

during past three years. Tariff reduced thrice during the year 2003-2005 and new

telephone installation charges are reduced by 50% and in some areas it has been made

free. Furthermore, substantial savings on telephone shifting charges and other services is

offered to customers. Tariff of domestic bandwidth/ leased lines reduced giving more

incentive to ISPs and mobile operators. Bandwidth rates reduced from US$

90,000/E1/month (1998) to 6000/E1/month (present). In addition “Econo-Bandwidth” is

available at US$ 3000/E1 per month42.

In short, it can be said that technological advance brought forward by the many

dimensions of the IT revolution, has completely transformed the telecommunication

41 1. “Prospects for Pakistan IT industry”, The News International, May 6, 2001. 2. “Status Of Pakistan IT Industry”, The Dawn, February 28, 2005. 42 “Significant Potential for IT” ,The Dawn, 20th April, 2005,

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industry defined in the broadest possible way in the world and in Pakistan as well. The

relative advantages of the IT revolution lies in the optic fiber infrastructure in advanced

countries like U.S, Japan, U.K and other. It is also adequately present in Pakistan.

Telecommunication infrastructure of Pakistan does not necessary lag behind that of

advanced countries and have all latest technologies in telecommunication being used by

all these countries.

IT Human Resources Status in Pakistan

3.1.8. Human resource is the major element of success of any system. Human resource

development is central to adoption of technology and promotion of sustained

development. Pakistan having about 140 millions population has great talent to be used in

IT projects. No doubt, it has late entry in IT but it is now at that level, where its

neighboring country India was 14 years before. Among others, one of the major problems

as Ali(2005) indicates to this slow IT diffusion in the country is lack of IT trained and

expert manpower. The literacy rate and the number of skilled workers available to

provide technical support in IT are comparatively low in Pakistan.

Therefore, to realize the need of time, in order to take-up the challenge and as a part of a

comprehensive master plan for manpower development, an aggressive program to

upgrade IT education at various levels has been undertaken by the government under the

auspicious of IT policy and action plan. Over 200 institutions including 26 recognized

universities have started different IT education programs. Free Internet connections are

being extended to public sector universities under an agreement with the private sector

ISPs & PTCL. The setting up of virtual university43 is one step forward in extending the

frontiers of quality IT education in the country(Zaidi & Tahir, 2002).

A large number of educational and professional institutions have been established in the

country for imparting IT education and few others are on way(Khan and Shah, 2004).

Kazmi(2005) argues that human resource development has been assigned the top priority

43 Virtual University has been established under an ordinance promulgated by President Pervaiz Musharaf on October 11, 2002, to provide education & training in Information Technology, Business Management and emerging sciences through satellite, television & Internet.

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for the development of local IT industry and to position Pakistan as an important player

in the international IT market. Under this plan a large pool of academically as well as

technically skilled IT manpower is being developed to meet the local and expert need.

The policy envisage the establishment of specialized IT educational institute, offering of

scholarships for higher IT education in the filed of IT, establishment of IT boards,

establishment of IT parks, Software houses, IT cities, in all major cities, National Testing

and accreditation services of educational intranet, strengthening of existing IT institute

and hiring faculty from abroad. Hundred of millions of rupees are also being payout in

upgrading existing public sector universities for IT education. Table 3.2 exhibits an

approximate no of available IT professionals in Pakistan. In this regard Hussan(2005),

however, criticizes the large scale establishment of IT institutions by saying that there are

serious imbalances at various skill levels and these institution are giving low level and

sub standard education and producing only lower level white-collar labor force. This has

lead to critical shortage of highly skilled workers, on the one hand and surplus of while-

collar labor force at lower skill levels, on the other hand. He urges that a proper policy

formulation to improve IT education quality from the government side could avoid these

mismatches.

Zaidi & Tahir(2001), Bhatti(2003), Ali(2005), Hussain(2005) and Syed(2006) also

indicate the presence of following pitfalls in IT education systems going predominant in

Pakistan 1) proliferations of standard in IT education 2) lack of competent IT faculty in

universities 3) obsolete material is taught by most of the universalities in Pakistan 4) lack

of imparting adequate analysis and design skills 5) lake of latest teaching methods with

video conference concept 6) outdated text books etc.

Zaidi and Tahir(2001) say that this pathetic state of IT education can be overcome by

appropriate curriculum development, faculty development, students scholarship and

financial support, quality assurance through monitoring and accreditation system, market

links through internships, projects, placements services, IT application etc. They further

say that by establishing world class computer laboratories, contacts, and collaboration

with other universities in the world, development of strong and cohesive industry

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oriented educational and research programs help organizations to accelerate their

productivity through computerization, involving industry in helping IT educations like in

advance country44, to impede the outflow of valuable human resources, and to attract and

retain competent IT peoples in the country by offering them high salary.

Table 3.2: Approximate Number of IT professional in Pakistan

Source Pakistan & Gulf Economist, December 5-11, 2005. pp 16.

Pasha(2005) also suggests that the government can assure the quality education in private

and public institution by developing quality assurance tools and procedure, asking the

institutions to update curriculum in the light of international recommendations, start new

and demand oriented programs, maintaining academic level of excellence in light of

voice of industry and developing materials and processes to propagate IT.

To sum it up, it can be said that like all other components, human capital is also

indispensable for IT systems. Pakistan is rich in human resources, which matter most for

economic advance, as well as other natural resources. Its’ 140 million population has

enormous potential to be trained in any specialized field including IT. Pakistan has talent

but there is a need to properly train and provide directions to the people. Human

resources need to be developed in the right direction. The government of Pakistan now is

trying at all level best to train the masses to become IT experts by offering different

programs. However, there is a need to check the quality of the IT education and the usage 44 In America AT & T in 2003, has committed $150 millions to provide Internet access to all schools.

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of the funds being reserved for IT uplift. In order to put its economy on track and to

compete with the growing economies of the world, Pakistan needs to quickly take steps

to train and bring its workforce to the international education standards, incorporate new

technologies and modern management practices into its existing industries, and to bring

extreme focus on building an information based economy by upgrading the technical and

managerial skills of its people.

Conclusions

3.1.9. Information Technology has proven to be the key technology of the past three

decades. Over last two decades it has developed at a breakneck speed and has brought

tremendous opportunities for mankind globally. In Pakistan IT is comparatively a recent

arrival but it is progressing smoothly. Realizing its importance, Pakistan started

introducing IT to meet challenges of globalization era. Pakistan has accepted the

challenge of the 21st century by making efforts in the development of Information

Technology. IT has been introduced in every discipline, from shopping to banking and

education, entertainment or travel etc. Every activity has been made possible by the use

of advanced technology. Large satellite dishes, mobile phone, Internet and cable systems

have been penetrated into the Pakistani culture. Newer and IT friendly methods are being

acquired to keep people abreast of the latest information about the innovation and

inventions, going on around global. The growth in Pakistan IT industry has been

unleashed in the past years. Almost every organization working in Pakistan now is using

IT for its work. The Government of Pakistan has laid great emphasis on enlarging the

scope and intensity of IT in a variety of filed. IT has got massive attention from the

government at present. The government has liberalized its rules with regards to IT and

offering different incentives to boost up IT usage, through comprehensive policies

regarding IT, telecom deregulation, cellular mobile and broadband. These policies have

given strategies direct and set objectives for improvements of Information and

Communication Technology in the country. Pakistan's IT industry has everything one

may need. A modern and rapidly expanding telecommunication system, experts from

various disciplines, highly skilled and economical workforce - all this backed by an

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unmatched investment package offered by the Government of Pakistan. The government

is building IT skills by liberalizing its laws for establishing IT institution.

Despite having all this the IT industry in Pakistan has not yet achieved sufficient maturity

for it to fulfill its needs and to face severe competition in the international market. The

country has people with technological skills but need to be refined. Pakistan has a relative

advantage for telecommunication but it is rather week in hardware and software. The IT

hardware industry is facing death while its counterpart-the software industry is

flourishing. It is urgent need, therefore, to create business models and new plans for

growth of hardware and quality software in the country. The substandard educational

institutions are imparting low quality IT education in the country and earning a bad name

to it. . These institutions are needed to be monitored for quality education to produce

world class IT experts.

All in all it is no secret now that Pakistan has emerged as one of the most technological

enhanced nation in the region. In very small span of time the government has managed to

turn around the economy to make its base more along the lines of technology oriented

industry rather than conventional industries of yore. One of the core changes has been the

shift of the government from telecom service provider to market regulator. But, the

success of future technology industry in Pakistan is directly linked with the success of

Pakistan’s image and stability. In this era of globalization the country is taking a tempo

towards the contemporary epoch of telecom revolt. The growth rate in each and every

division of the sector is remarkable.

To conclude all above discussions it can be said that though IT comparatively got late

and slow introduction in Pakistan but the journey which started from 1960s is still going

on. IT has priority on government’s every policy and agenda now. The government of

Pakistan now is taking each necessary step for diffusion of IT in the country. Pakistan no

more remains a silent observer to the spiraling growth of the IT globally but it is a true

user of all its latest tools and techniques.

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Section II

IT In Banking & Manufacturing Organizations.

General

3.2.0 Information Technology has become, within a very short time, one of the basic

building blocks of modern industrial society. IT has become an integral part of the

economy of every country, and is playing an ever-increasing role in the industrial and

service sector. Drucker(1992) pointed out in early 1990s that the classical factor of

production, land, labor and capital are becoming secondary and knowledge as the primary

resource for the new economy. Lang(2002) also observed that a transformation is

occurring from the old economy to the new economy, from an emphasis on the main

factors of production, namely capital, land and labor, to an emphasis on information,

knowledge and technology. The new economy is moving beyond bulk material

manufacturing to designing new technologies, beyond processing physical resources to

processing knowledge, beyond applying raw energy to applying ideas. Vasudevan(2003)

predicts that now obsolete business principles, practices and technologies will not survive

in the knowledge economy. Thus a review of management principles, concepts and tools

is timely. Organizations need to be innovative to survive and IT can be a great tool for all

those innovations and of course survival.

Significant advances in the related technologies of computers, telecommunications, data

access and storage devices, and software packages have created a wide spectrum of new

opportunities for organizations in the world as well as in Pakistan. The speed, cost, size,

and capabilities of the new IT continue to improve rapidly and there appear to be

unlimited applications that could be computer-enhanced.

The Pakistani Government and the business community in the country have fully

understood the value that automation can adds to their commercial concerns, by driving

down costs, improving products, reducing time to market and providing quality services

to their customers. Therefore, IT is being used in almost all government and private

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organizations. According to a study conducted by the ministry of Manpower, Labor and

Overseas government of Pakistan in the year 2004, it revealed that the introduction of IT

in the country has influenced positively the organizations in term of increased

productivity, marketing and reducing per unit cost. It leads to varying degrees of

improvements in job, living standards, fair treatment to employees, level of worker’s

satisfaction, capability enhancement, balancing family life with work etc. in almost all

sectors of Pakistan. By emphasizing the importance of IT Sohal et. al(2001) say that IT

now is being applied throughout all areas of both manufacturing and service industries

including banks. However, companies are only achieving moderate benefits from their IT

investments. Predominantly the major benefits achieved across both industries have been

limited to improvements in productivity and reduction in costs.

It has been observed in the literature that IT is now not being used only as a traditional

cost reduction tool but also as a strategic tool. This trend seems more apparent both in

manufacturing and service sectors. For attaining greater productivity from IT,

organizations in the service industry are employing IT to enhance the value of product

and services to a greater extent than that of manufacturing. There is less utilization of IT

in manufacturing sector and possible indicators of poor IT utilization by manufacturers

are due to a result of failing to match IT capabilities to organizational needs. Conversely,

IT departments in manufacturing organizations have more of a reporting, consultant type

role to those responsible for strategic planning and do not have as direct a role in strategy

development as seems to be the case in service industries (Poku, 2002, Anadarajan.

2000). It has also been noted that economic factors, insufficient top management supports

and difficulty to justify cost were the greatest impediments to IT success in both

industries in the past, but now with top management commitment having a higher

response in the industries, these problems are being reduced gradually(Sohal et. al,

2001;Sherer, 2004). As a backbone of Pakistan economy, the manufacturing and banking

industries are the biggest beneficiary of all the IT innovations. Although Pakistan is not

yet self sufficient in all IT tools and relies mostly on imported hardware, software and

telecommunication equipments but its IT industry is on take off stage with all push up of

Pakistan’s Government.

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The ensuing discussion highlights in detail the status of Information Technology usage in

banking and manufacturing industries of Pakistan.

Information Technology In Banking Organizations

3.2.1. Arthur(1996) says that service, the ‘tertiary sector’ of the economy comprises of

four distinct groups: 1) distribution services, 2) producer services, 3) social services and

4) personal services. Within the producer services sector, it has been the financial

(including banking & finance) and other business, accounting, engineering, and

architectural services that have grown most rapidly. Service sector also covers a wide

gamut of other activities like trading, infotainment, real estate, transportation, security,

courier, management and technical consultancy etc. Akhter(2006a) posits that technology

helps to catalyze efficiency in the provision of financial services and ultimately in

determining the winners in the intensely competitive financial markets of the future.

Technological breakthroughs have forced fundamental changes in the financial industry.

Strategic business plans have taken into account new ways of doing businesses,

launching e-banking, and using information and technology for developing better internal

control, more sophisticated risk management systems and better and convenient customer

services.

According to Akhtar(2006a) in addition to product innovation, globalization,

deregulation, macroeconomic performance and priorities, universal banking, risk

management, changing role of and demands on the regulator, the technological

advancement is also one of these factors which are generally believed to have been the

major drivers of change in the financial industry world over. Biswas(2005) reports that

during the last two decades there has been revolution in the technology of banking. The

micro electronic technology has dramatically reduced the costs of transmitting,

processing and storing information. Bruce(2005) narrates that IT has basically been used

under two different avenues in banking. One as communication and connectivity and the

other is as business process reengineering. IT enables sophisticated product development,

better market infrastructure, implementation of reliable techniques for control of risks and

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helps the financial intermediaries to reach geographically distant and diversified

markets(Bruce, 2005).

Poku(2000) submits that computerization is a positive step to bank’s growth as with the

aid of computer bank work can be faster. Tremendous rises can be expected to be

obtained in the business after the use of computer. Efficient and prompt service to the

customer, timely completions of statutory requirement, timely required information are

possible. Banking sector is one sector where the all-invasive influence of IT is felt very

strongly. Banking is no longer confined to brick and mortar firm. There are alternative

delivery channels now, essentially technology driven like ATMs, Internet banking,

mobile banking, tele banking, e-banking etc., which have ushered in the era of

convenience banking. Technology use no doubt has resulted in tremendous reduction of

transaction costs, speedy execution of voluminous transaction, introduction of new

innovative products and services (Khan, 2002).

Shere(2004) demonstrates that IT has made possible the creation, valuation, and

exchange of new complex financial products on a global basis. Technology synergies

have enlarged the set of productive capital investments while lofty equity values and

declining prices of high tech equipment have reduced the cost of capital. The result has

been a veritable explosion of spending on high tech equipment and software, which has

enlarged the growth of the capital stock dramatically over the past five years. In the

banking industry inter-branch and inter-bank transactions take place electronically.

Millions of account holders and thousands of internal users can access and transfer

electronic information and make online transactions(Shere, 2004).

Information Technology in banking is not new, as according to the banking world of

Finland the systems and connections between banks have based on the use of IT for a

long time. All over the world banks are increasingly deploying IT to their operations to

improve productivity and enhance customer services. The role of Information

Technology has grown and simultaneously changed in the banking sector over time and

financial institutions are one of the largest investors in information systems (IS). In

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1960’s IT was used to raise the cost-effectiveness. In the 1970’s IT was used as a

strategic competitive possession and in the 1980’s and onward IT became a key-factor in

increasing new services(Bhide,1997). The significance of delivering financial services is

enormous for efficiency both in terms of cost of product and customer satisfaction.

Modern technology like IT has completely changed the channels of delivering financial

services.

The financial services, particularly banking have been the major users of IT and

communication technologies. According to a survey by Ernst and Young and the

American Banker, the industry’s Information Technology (IT) spending is expected to

reach unprecedented heights in the late 2000s. Sievewright(2003) says that financial

service firms continue to spend heavily on technology. He investigated that worldwide

spending top $337 billion in 2003, and it is a 2.3% increase over 2002.

In the last decade alone, bank’s spending on IT has risen rapidly from some $14bn in

1990 to 20bn in 1995 and 30bn(approximate) in 2000(Gupta & Collins, 2001). This

diffusion of IT has began to derive benefits in term of lower cost, employee

productivity(Strachman, 1994), increase in transaction throughput(Karr, 1996); overall

profitability(Teixeira, 1995). Current statistics shows that workers in the finance industry

use computers more than any other industry45.

According to Terry(2005) technology has changed the contours of three major functions

performed by banks, i.e., access to liquidity, transformation of assets and monitoring of

risks. Further, IT and the communication networking systems have a crucial bearing on

the efficiency of money, capital and foreign exchange markets(Terry, 2005). Many

successful financial institutions have clearly demonstrated that information systems and

technologies can be a powerful competitive weapon that can be used to capture market

share, improve customer service, reduce operating costs, and create new products and

services(Lederer & Mendelow, 1988). Therefore, it can be said that IT is the means of

45 Bureau of the Census, Computer Use in the United States: October 2003:

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increased production in the banking industry, with technology revolutionizing the moving

and storage of money, and the distribution of financial products have become easier.

Mayer(1987) while narrating the history of computer usage in banking demonstrates that

the use of computers in banking first began in the early 1950s, when the first large

commercial computer was built for Bank of America. Initially, computers were used to

process check transactions through magnetic ink character recognition. With the

introduction of first automated clearing house in the early 1970’s electronic funds transfer

(EFT) was made possible, and then ATM was introduced. Automated Teller Machine

(ATM)46 is one of the most significant technological investments made by the

commercial banks. ATM’s introduced the power of computer technology to the general

public and made banking convenient for consumers. Today, ATMs deliver banking

service 24 hours a day, 7 days a week to more than 22 millions peoples only in USA.

Koepp(2002) says that banks increasingly have turned toward ATM and other computer

technology like prepaid cards, loyalty cards, debit cards and even chip cards, to reduce

the high costs associated with maintaining traditional “brick and morter” branches staffed

by tellers. ATM transactions, along with transactions made by telephone, have replaced

transactions formerly made with human teller. Computer Technology is used by

commercial banks to reduce costs and survive the competitions. Consumer acceptance of

ATM’s and touchtone telephones to make financial transactions has allowed banks to

reduce the number of costly transactions made with human teller. Subsequently, banks

have reduced the employment of tellers and have converted many of the remaining teller

positions into part time jobs. In view of this Koepp(2002) predicts that in the future

commercial banks are expected to achieve a rise in real output, while providing more

services with fewer employees.

Franke(1987) also put forwards his view to the importance of IT in banking by saying

that financial sector appears to be a clear leader in the growth of IT. It was among the

46 Don Wetzel developed ATM in 1973 and it was first installed at Chemical Bank in New York (Shelly et. al(2004) pp5.39.

114

first to incorporate electronic data processing in its operations, through check handling,

bookkeeping, credit analysis and ATMs. Across all industry sectors, the earliest

applications of IT were directed towards reduction of personnel costs in such labor-

intensive operations as accounting, payroll and purchasing. Since then, computing and

communication technologies have effected all functions of the modern corporation,

gradually displacing traditional labor and capital inputs, through such applications as

electronic order entry, electronic data interchange, office automation, telecommuting,

expert systems, robotics, object oriented programming and point of sale settlement,

among others. The recent trend of IT-led restructuring and reengineering has accelerated

the transformation of business process. Martini(1999) has also found that the banking

industry has used IT to enable increase in the volume of transactions as well as the

development of new products and services to attract customers.

The banking applications have ranged from back-office (check and accounts) processing,

mortgage and loan application processing, and the electronic funds transfer to more

strategic innovations such as automated teller machines and new kinds of securities. The

management information systems, distributed computing devices, open systems, high-

speed data networks (LAN, MAN, WAN, ISDN, DSL, etc.) relational database

management services (RDBMS) have been important development milestones in IT with

major impact on financial services. All these technologies are being used extensively by

the banking and financial services sector. Nsouli(2002) notes that IT expenditures by the

US banks have recorded a compounded annual growth rate of about 8.5 per cent. He says

that given the magnitude of the banking industry’s growing investments in IT over last

two decades, large increases in productivity might have been expected.

As discussed above IT has been an integral part of banking system since almost four

decades. IT has always helped the banking industry to serve its customers in better way in

direct deposit, online loan applications, ATM withdrawals etc. However the arrival of

Internet Technology in banking system has taken a new shape and style with a blend of

convenience and satisfaction. Banking from a customer’s bedroom, office or anywhere in

the world has made its way into banking system with the advent of Internet technology.

115

Sievewright(2003) also highlights the importance of usage of Internet in banks and say

that the Internet with its potential has changed the very nature of banking and therefore

growth potential for online consumer banking is enormous. According to his estimates,

there are over 10,000 banks operating on the Internet in the United States, performing a

variety of banking services. A large part of banking now is being conducted online.

Sievewright(2003) further adds that this growth of Internet banking has also raised a host

of legal issues, including security, authentication, consumer protection and privacy and

the banks have to overcome these problems.

Many other researchers have also investigated the impacts of IT on banking, Zhu et al

(2004) for example have found that overall impact of technology on the banking industry

is positive. They investigated that the only need is that banks need to carefully consider

where they target their technology efforts and expenditure. Their research specifically,

has indicated that an investment in customer-focused technologies provides a good return

on investment. Other researchers including Shaanhan(1995) through light on IT impact

on banking employment. According to them technology has had an impact on

employment in the banking industry but it is not the only cause for the job declines. The

numerous mergers and failures that have occurred in the industry also have taken their

toll on employments. Prasad and Harker(1997) proposes in their study that additional

investments in IT capital may have no real benefits and may be more of a strategic

necessity to stay even with the competition. However the results of their study indicated

that there are substantially high returns to increase in investment in IT labor, and the

retail banks need to shift their emphasis in IT investment from capital to labor.

Information Technology & Banking Sector Of Pakistan. 3.2.1.1 The financial sector in Pakistan can be grouped into banking and non-banking

financial institutions(NBFIs). Banking institutions include large public sector scheduled

banks, private sector banks and foreign banks, while NBFIs include development finance

Institutions (DFIs), private sector investment banks, leasing companies and modarbas.

The financial system in Pakistan has grown substantially, benefiting from multi-pronged

reforms. These reforms have been pursued persistently and vigorously over a decade or

116

so and have supported economic growth. The inefficiencies and weaknesses which were

typical of banks’ operations in the pre-reform era have been reduced radically.

Liberalization and deregulation, core pillars of the reform measures, have served to

enhance the size of the banking system both in terms of the number of banks and growth

in credit, besides instilling a degree of competition in the banking industry. (Akhter,

2006). Banking industry in Pakistan has seen great transition during fifty-nine years of

his history, especially since early 1970s. The banking nationalization in 1974 and then

privatization and liberalization in early 1990, are termed as major restructuring years of

the entire banking industry of Pakistan. At the time of inception of Pakistan in 1947, only

few bank branches existed in the country, which were concentrated mainly in the urban

areas. Moreover, Pakistan was without a central bank of its own till June 30, 1948.

However, by early 1990s the banking sector had spread to every nick and corner of the

country.

The market for banks is diverse in Pakistan comprising Nationalized Bank, Private Banks

and Foreign Banks. In 1993 there were 33 commercial banks in Pakistan 14 being local &

19 foreign. By the end of 2001 due to government liberalization policy to setup a private

bank, the number has increased to 43, 24 being local & 19 as foreign. But by the end of

2005, with some mergers there were 38 commercial banks 14 being foreign and 24 being

local. In addition to these commercial banks, there are four specialized banks to meet the

specific requirements of different sectors of the economy. These includes: Agriculture

Development Bank of Pakistan, Federal Bank for Co-Operatives, Industrial Development

Bank of Pakistan & Punjab Provincial Co-Operative Bank Ltd. Total number of

scheduled banks branches stood at 7,075 as on 30th September, 2005. There is a

phenomenal progress in banking sector of Pakistan. It recorded an increase of 99%

growth in profit in only one year i.e 200547. NBP, HBL, MCB, ABL,UBL are considered

five large banks and are very dominant in the banking industry , in term of total number

47 The daily Dawn: “Banks profit grew 99pc in 2005”, Tuesday March 21, 2006. pp9. Mahmood Javed (2006) “Another productive year for Banks” Money Plus July 17,2006.

117

of branches, deposits and advances, collectively accounting for 78% and 77% of total

deposit and advances respectively. Most of the local banks are in private sector now, and

many of them have started business since 199248.

The banking sector of Pakistan has a number of challenges to face in this century,

encompassing economic, social and policy and procedural fields and IT etc. In Pakistan

almost all national and multinational banks are using IT to increase their performance.

The introduction of computer in banks in Pakistan started in 1965 when the main

commercial banks in private sector i.e. Habib Bank, United Bank and Muslim

Commercial Bank started acquiring computers to regulate their banking work. Since that

time there is a massive investment in IT in banking sector (Akhtar, 2006b). This is bore

out by the fact that during fiscal year 2003-2004, over US$ 200 millions was invested by

the financial services sector into IT products and services49. Shafiq(2001) says that not

only this but also the banking sector has dramatically increased its dependence on use of

IT, and it is evident by the growth in the number of branches that are connected online.

Most of the Pakistani banks (local and foreign), have launched their web sites and have

uploaded many things on web including accounts opening forms and loan applications.

Likewise, the number of Automated Teller Machines(ATMs) and the use of automated

cheque clearing and other back end systems within the banking community have

increased50.

There have been great advances in Pakistan banking technology in the past several years.

The most recent automated banking systems like Misys, Sibel, and Fidility etc are being

installed in many of the Pakistani banks. Kazmi(2004) points out that most of the banks

operating in Pakistan however, have been making huge investments in three key areas

namely 1) expansion of the branch network 2) up gradation of the existing infrastructure

3) adaptation of the new technologies with their ultimate objective is to offer a complete

electronic banking facility.

48 Pakistan banking infrastructure statistic: State Bank of Pakistan’s report 30-09-2005. 49 “Status Of IT Industry Of Pakistan, The Dawn, 28th February, 2005. 50 Approximately 1400 ATMs have been installed by different banks till July 2006 in different cities of Pakistan (The Dawn, August 22, 2006).

118

Table 3.3

119

Syed(2006) however argues that electronic banking does exist in Pakistan but its use at

present is restricted to big companies and multinationals and the pace of automation in

multinational banks is greater then the local bank.Further, in banking software foreign

companies are the real beneficiaries of IT projects in Pakistan and about 75 per cent of all

software spending on most recent 12 projects in the country, especially those by large

banks, are awarded to foreign companies51. Syed(2006) stresses on equal participation of

the local software companies as well.

Ahmed(2003) effectively argues that huge investments by the commercial banks in

technology has ushered a new era of convenience and improved quality of services. The

banks are offering Internet and mobile banking that has made major impacts on their

performance. In the end to mention another big achievement in payment area is RTGS

setup by State Banks of Pakistan for interbank settlement. All above discussion can be

concluded in a way that a lot has been achieved and lot more remains to be done and at a

much faster pace in banking technology. It is encouraging that the IT initiative is being

fully supported by the regulators very cautiously towards development of complete e-

banking status in Pakistan. It is therefore, predicted that the future of the banking

industry’s IT efforts and its spending will continue to increase in importance for the

transition of traditional banks into virtual banks. The recent statistic revealed that with

this aim the total spending on IT is projected to increase by about 100 percent by next

five years. Table 3.3 presents a real picture of e-Banking infrastructure statistic of

Pakistan.

Information Technology in Manufacturing Organizations

3.2.2 Manufacturing is the process of converting raw material into products. It

encompasses the design and production of goods, using various production methods and

techniques. Manufacturing is the backbone of any industrial society. The world

manufacturing is derived from the Latin ‘man factus’, meaning made by hand. Before

industrial revolution most things were made by hand but only the very rich could afford

51 The State Bank Of Pakistan’s automation project (Total volume of 34 million US$) has been awarded to M/s Hyundai Information Technology Co. Ltd. That is the biggest IT projects in Pakistan: NetMag Aug05.

120

to have things designed and made for them. Today every body can afford most of

machine made things(Morisi, 1998).

Automation in manufacturing organizations goes back to 1900, around the year 1900,

factory mechanization facilitated mass production to meet the consumers’ demands for

improve products. In the year 1930, transfer lines and fixed automation were created to

facilitate mass production. This resulted in the development of programmable

automation. By the year 1950, numerical control (NC) was developed as an innovative

approach to programmable automation. With the development of commercially available

computer technology, the application of computer in manufacturing started to emerge by

producing a variety of new technologies. By the year 1955, the introduction of computer

aided design(CAD) and development of NC resulted which lead to the evolution of

system like computerized numerically controlled machine tolls (CNC). By the year 1970,

development in CAD applications and Computer Aided Manufacturing (CAM) based

systems, Computer Aided Engineering(CAE),Material Resource Planning(MRP),

Flexible Manufacturing Systems (FMS),which are collectively named as AMTs-

Advanced Manufacturing Technologies was made. AMT provided flexibility as well as

data driven computer integration for a manufacturing organization, in which the

manufacturing technology utilized is intelligent enough to urge forward the activities

with less human interventions. Industrial robots, automated guided vehicles, and

automated storage and retrieval systems are also introduced. These applications can be

connected via Local Area Networks(LAN) to from Computer Integrated

Manufacturing(CIM) and externally, across organizations and space, via Electronic

Documented Interchange(EDI) (Sohal, 2001).

For every industry, each decade is blessed with a particular buzzword or a set thereof. In

the manufacturing sector, the pride of place has been occupied by the world ‘technology’.

The technology advancement in the world over is so rapid and wide spread that isolates

manufacturing and technology from each other is merely an impossible proposition. IT is

becoming critical to many manufacturing organizations that want to be a world-class

manufacturer as IT often provides a manufacturing-based advantage. IT can assist

121

manufacturing firms in developing their strategic roles. In today’s competitive global

market, for the survival of any industry, manufacturing companies need to be pliable,

adaptive, responsive to change, proactive and be able to produce a variety of products in

short time at a lower cost (Ho, 1996). Hence, manufacturing companies are compelled to

seek advanced technologies by integrating manufacturing facilities and systems in an

enterprise through computers, its peripherals and communication network to transform

island of enabling technologies in to a highly interconnected manufacturing systems.

Today, the capability of producing high quality products according to diverse customer

requirements with short delivery times has become the characteristic of order-qualifiers

for manufacturing industries. Furthermore, non price factors, such as quality, product

design, innovation and delivery services are the primary determinants of product success

in today’s global arena. Implementing integrated advanced technologies is an effective

approach towards solving the problems of decreased productivity, labor cost and

consequent rise in unit costs, which are continually plaguing present day manufacturing

manager. Implementing advanced manufacturing technologies(AMTs) provides

opportunities to achieve competitive advantage in an intermediate-to long-term time

frame (Sohal, 1999).

The Internet based distributed systems motivated the industries to utilize IT in all areas.

Advance in software technologies have been transforming the world of integration into

compatibility systems and devices by establishing an open connectivity standards, agreed

by the manufacturers, which will provide plug-and-play communication and

interoperability between field devices, control systems, and enterprise wide business

applications(Lang, 2002).

Pakistan Manufacturing Sector And IT

3.2.2.1 Pakistan industrial sector remains a relatively small part of the total economy.

Pakistan’s manufacturing sector has grown rapidly but remains inefficient and lacks

diversification. In practice, Pakistan’s industrialization process has largely been governed

by trade and tariff policies which are driven by revenue and/or balance of payments

considerations rather than by a coherent industrial policy framework (Kemal, 1999). The

122

Pakistan developed a substantial industrial sector in a very short time. The share of

manufacturing in GDP was 14.8 % in 1999-2000 but increased to 18% in 2004-05.

Almost 24% increase in six year. Pakistan’s economy, which grew at 6.4% in fiscal year

2003-2004, achieved a broad based growth of 8.4% in 2004-2005. The overall

manufacturing accounting for 18.5 % of GDP, registered an impressive growth of 12.5%

against the target of 10.2% and last year’s achievement of 14.1%. Overall, manufacturing

is growing at a much faster pace than agriculture and services and if this pace is

sustained, its share in GDP is likely to rise further in the medium term52. Various factors

including accommodative monetary policy, financial discipline, consistency and

continuity in policies, strengthening of domestic demand are continuously improving to

improve contribution of manufacturing sector. In Pakistan both large-scale,

multinationals, local and small scale domestic and international companies are operating

which are producing goods of almost all kinds(Saeed, 2003).

Table 3.4 Sectoral Shares in GDP 1999-2000 and 2000-2002. Sr.

No

Sector Percentage

(1999-2000)

Percentage

2000-2001 (R)

Percentage

2001-2002 (P)

1 Services 49.1 50.2 50.9

2 Agriculture 25.9 24.6 24.1

3 Manufacturing 16.7 17.5 17.7

4 Others 8.30 7.70 7.3

Total 100.00 100.00 100.00

Source: Economic Survey of Pakistan, 2000-2001, & 2001-2002 pp. 10 Though the introduction of IT in Pakistan started in 1960’s but it’s wide spread diffusion

has started in the last few years. Much attention has been focused by the government on

development of IT infrastructure in the country on all levels. The government also

encouraged and promoted to the manufacturing sector to use IT at all levels. Revolutions

beget openings of one kind or the other. The IT revolution would semblance to have

opened a beneficial window of opportunity for the Pakistani manufacturing

organizations. In manufacturing sector of Pakistan, Packages Ltd. was the first company,

52 Pakistan Federal Bureau Of Statistics, 2004.

123

which started using computer in 1957. After that many other companies in this sector

started using computer to increase their productivity. Now IT usage in manufacturing and

industrial sector is very common. Within the industrial sector, the use of Enterprise

Resource Planning software packages such as SAP and Oracle has become

commonplace, companies such as ICI, Caltex, PSO, Packages, Simens, KSB pumps,

Pakistan Tabacco, Honda Atlas and tens of others have deployed high end ERP (SAP)

solutions. All manufacturing organizations including textile are investing heavily into

specialized software and IT solutions to reduce costs and improve quality. Saphhier

Textile, Kohinoor, Nishat, Mehmood and Hasni Hosiery etc. have ongoing IT projects

worth millions of rupees53.

Conclusions

3.3.0. IT has revolutionized and redefined all aspects of human interaction in social and

business scenario. It has turned the world into global village where limits of time and

location no more apply. The companies use IT to get improved efficiency and

effectiveness. This use has grown at an astonishing rate over the past three decades. Now,

Information Technologies permeate nearly every aspect of modern business operations

and communications. As computing and networking machinery proliferated into every

aspect of business life, the pressing need to manage these technologies effectively has

grown accordingly.

Realizing the need of time like other countries, in Pakistan, banking & manufacturing

industries are also using IT to increase their performance in almost all areas. IT has

become means of better production and services in these industries. Advancement in

production and communication through IT has changed the nature of working for both

the industries. In addition introduction of Internet and advancement in computer

connectivity have given companies an opportunity to conduct their business on-line.

According to above discussions, the banking and manufacturing industries are seemed to

be more benefited with IT. Moreover, it is also observed that IT has changed the nature of

business of both the industries. In banking, IT is being used mostly for customer oriented

applications and in manufacturing for traditional systems. 53 Report from Federal Ministry of Industries, 2004.

124

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