Convergence between Information and Communications Technologies (ICT), in particular the Internet, and its related applications has enabled low-cost diffusion of information technology products and many telecommunication services in developing economies. The telecommunications sector continues to be deregulated world-wide, the co-existence of stark poverty and islands of technology innovation in many developing countries has received little attention. This paradox provides the motivation to find the relationship between telecommunications and the state of economic growth in developing countries.
The world economy has experienced enormous growth in the past 50 years, yet the gap between the richest and the poorest countries has increased. In 1960, the 20 percent of the world’s population living in the richest countries had 30 times the income of the 20 percent poorest, a ratio that increased to 76:1 in 1997 (Human Development Report, 1999). There have been several attempts to explain the increased difference. Proponents of the endogenous growth theory claims that a technological revolution has created a new growth paradigm.
Information and Communication Technology, which is mainly found in developed countries, has become an engine for long-run economic growth as railways and electricity once were. Following the information technology revolution seen in the industrialized world in the 90s, ICT has often been advanced as a possible remedy for developing countries and the slow or decelerating growth they have faced. Increased economic growth is seen as necessary to make each country self-supporting and able to continue the development beyond mere everyday survival, as is the case in many least developed countries today.
International organizations like World Trade Organization argued for many years for the free trade of goods as the best means of encouraging development while services were seen as non-tradable. However, in the Uruguay round of negotiations services were brought in, and the General Agreement on Trade in Services (GATS) was signed in 1994.
The important feature of the service sector is that services are not only valuable in themselves but also serve as crucial inputs into the production and trade of most goods so, considering the telecom sector as a part of services sector claimed as an enhancing tool of development because of its broad range. By facilitating the diffusion of information and communication, it increases people’s ability to participate more actively in the social, economic and political life of a community.
Transparency increases, making corruption among public administrators more difficult. Furthermore, telecommunications has a direct influence on productivity growth. It raises the efficiency of service providers and opens new markets by ‘reducing’ distances. Telecommunications is a growing sector that creates new activity in itself, contributing to economic growth and employment creation.
Telecommunications development 1990-1999, by income
During 1980s, utility of telecommunication sector was globally recognized and it was considered as the pre-requisite for the economic growth so, gradually in all countries various telecom sector regulatory reforms like opening of boundaries for foreign direct investment (FDI), liberalization and privatization were introduced.
According to the World Bank, the private sector invested $230 billion in telecommunications infrastructure in the developing world between 1993 and 2003, and that countries with well-regulated competitive markets have seen the greatest extent of investment. Telecom revenues are also increasing at a steady pace with each passing year in Pakistan, in absolute terms, revenues were peaking within the information technology (IT) sector where the largest development in year 2021 was drastic increase in local manufacturing and assembly of mobile phones which triggered a reduction in imports where, 2021 was turned out to be a robust year for the telecom sector.
Telecom sector comprises of variety of components including internet, telecom, software, satellite and cable where Pakistan was focusing on holistic improvement of entire sector alongside its sub categories. The outbreak of Covid-19 will also brought a tremendous increase in telecommunication traffic and influx of e-commerce segment in Pakistan.
During the year 2021, Pakistan saw remarkable increase in data traffic across its rural and remote areas which cause an uptick in demand of high-speed connectivity so, “Telecommunication emerged as one of the most essential industry since the start of the pandemic and the most important development during the year 2021 was recorded in the telecom segment came from the big push Universal Services Fund (USF) due to the expanded broadband services to remote locations.
The telecom sector’s market size is estimated to go up by Rs51 billion or 8 percent to Rs695 billion by the end of fiscal year 2022 against FY 2021, according to the Pakistan Credit Rating Agency associated with the expansion of 3G, 4G and 5G services in Pakistan. Over the past decade, the mobile sector in Pakistan has expanded rapidly, enabling life-enhancing benefits such as financial inclusion via mobile money, access to educational resources and connected businesses so, it is concluded that the mobile sector plays a critical role in the development of the country’s economy and its digital transition. However, there remains a significant unconnected population in terms of unique subscribers.
The Global Mobile Industry Association (GSMA), estimates that about half of Pakistan’s population (43 percent unique-subscriber penetration) remains unconnected to a mobile network and only 30 percent population (unique penetration) are using mobile internet services. This was lower than the average in South Asia where tax contribution of the mobile sector in Pakistan remains considerably higher than the average for Asia and other regional averages, which constrains mobile operators’ ability to invest in connectivity, as well as the availability and affordability of mobile services to consumers.
In 2020, the total tax contribution of the mobile sector amounted to Rs170 billion ($1.1 billion), equivalent to 38 percent of mobile sector revenues. Furthermore, this was substantially higher than the Asia Pacific average (24 percent) and the global average (22 percent) which represents the fact that telecommunications development spurs economic growth of developing nations like Pakistan.