Pakistan’s startup ecosystem has seen significant growth due to factors like a young population, internet access, regulatory improvements, and local success stories like Careem and Airlift. However, challenges like insufficient infrastructure, poor education, talent scarcity, cultural barriers, and political instability hinder its full potential. A significant bottleneck is the lack of venture funding, with Pakistan ranking 10th in the MENA region for VC deals.
In contrast, India boasts 51 unicorns as of November 2023. This scarcity of venture funding traces back to factors like limited local investors, high risk perception, regulatory uncertainties, sparse exit opportunities, and weak intellectual property protection.
Why Pakistan is on 10th position in MAGNiTT Report
According to the MAGNiTT report, Pakistan is placed at the 10th position in the MENA region for Venture Capital deals because it has a relatively low number of deals and funding compared to other countries in the region.
The report states that Pakistan had 17 Venture Capital deals in the first half of 2020, with a total funding of $10.7 million. This is a 13% increase in the number of deals, but a 9% decrease in the total funding from the same period in 2019. The average deal size also dropped by 14% to $0.6 million.
The report also compares Pakistan with other emerging venture markets (EVMs), such as Turkey, Egypt, India, and Southeast Asia. It shows that Pakistan has a lower deal flow and funding than these markets, as well as a lower share of late-stage deals and a lower proportion of foreign investors.
The report attributes these differences to the various challenges and opportunities that each market faces, such as the size and maturity of the ecosystem, the availability and diversity of capital, the regulatory and legal environment, the quality and quantity of talent, the level of innovation and competition, and the potential for growth and impact.
The report concludes that Pakistan has a lot of potential to become a leading EVM, given its large and young population, its growing internet and smartphone penetration, its improving infrastructure and governance, and its emerging success stories.
However, it also acknowledges that Pakistan needs to overcome some of the barriers and gaps that hinder its start-up ecosystem, such as the lack of local and early-stage investors, the high risk perception and uncertainty, the limited exit opportunities and market access, and the weak intellectual property protection and innovation culture.
The report suggests that the government and the private sector should work together to create a more conducive and supportive environment for start-ups and investors, by providing incentives, facilitation, protection, education, and collaboration.
Addressing this requires collaborative efforts between the government and private sector. Initiatives such as tax incentives, facilitation of cross-border transactions, legal frameworks, support for incubators and accelerators, and promotion of angel networks and crowd funding platforms are essential.
The role of universities to promote innovation and entrepreneurship
The quality and relevance of university education and research play a pivotal role in shaping entrepreneurship. Unfortunately, Pakistani universities lag in academic excellence, research output, industry collaboration, and fostering an innovation culture.
The Times Higher Education World University Rankings 2024 reveal only nine Pakistani universities in the top 1000, with Quaid-i-Azam University leading the pack. Notably, none of these universities rank in the top 200 for key disciplines like engineering, technology, computer science, business, and economics.
Pakistani universities grapple with several challenges that contribute to their low performance in key indicators. Firstly, inadequate funding and a lack of autonomy hinder these institutions.
Insufficient financial resources impact their capacity to attract and retain qualified faculty and researchers, upgrade their curriculum and teaching methods, and enhance overall infrastructure and facilities. Without these crucial elements, universities struggle to provide a conducive environment for academic excellence and innovation.
Secondly, the quality and quantity of research output from Pakistani universities fall short, affecting various metrics such as citation impact, research strength, excellence, and influence.
The Scopus database highlights a stark reality, indicating that Pakistan contributed a mere 0.4% of the world’s research publications in 2020, positioning the country at 40th place concerning the number of citations per document. This disparity underscores the imperative need for a substantial improvement in the research landscape within these institutions.
Furthermore, limited collaboration and engagement with industry and society exacerbate the challenges faced by Pakistani universities. This deficiency has a direct impact on income generation and patent creation.
The Global Innovation Index 2023 places Pakistan at 107th out of 132 countries in innovation performance, with particularly low scores in knowledge and technology outputs, as well as creative outputs. A more robust integration with industry and society is crucial for fostering innovation and addressing the evolving needs of the nation.
Additionally, the internationalization aspect of Pakistani universities is lacking. This deficiency affects staff, students, and research endeavors. The UNESCO Institute for Statistics reveals that in 2019, Pakistan hosted only 3,418 international students, positioning it at 72nd in terms of outbound mobility ratio for its students.
Moreover, the Scopus database indicates that a mere 16.6% of research publications from Pakistan in 2020 were co-authored with international collaborators.
This limited global engagement underscores the importance of fostering international partnerships to enrich the academic environment and enhance the global standing of Pakistani universities. Addressing these multifaceted challenges is crucial for transforming Pakistani universities into hubs of academic excellence, research innovation, and global collaboration.
Pakistan low on Global Innovation Indeed 2023
The Global Innovation Index 2023 echoes this sentiment, positioning Pakistan at 107th out of 132 countries in innovation reflecting its subpar performance in various indicators measuring both innovation inputs and outputs.
The GII 2023 encompasses around 80 indicators across seven pillars. While Pakistan surpasses the average of its lower-middle-income group in knowledge and technology outputs, it falls below the regional average for Central and Southern Asia. Strengths include high-tech exports, ICT services exports, and ISO 9001 quality certificates, but weaknesses involve patents, utility models, scientific publications, and citations.
Across pillars like institutions, human capital, infrastructure, market sophistication, and creative outputs, Pakistan lags, ranking among the bottom 20 economies globally. Weaknesses span political stability, regulatory quality, rule of law, ease of business start-ups, credit accessibility, tertiary education, research and development, electricity output, ICT access, ICT use, venture capital deals, trademarks, cultural exports, and online creativity.
The GII 2023 report highlights challenges hindering Pakistan’s innovation ecosystem, including inadequate university funding, low research quality/quantity, limited industry collaboration, weak internationalization, and insufficient intellectual property protection.
Recommendations include adopting best practices from top-ranked economies, boosting innovation investment, improving education, encouraging interdisciplinary research, fostering industry partnerships, and promoting internationalization and diversity.
The solution
To elevate university education and research in Pakistan, key measures include increased funding and autonomy, enhanced curriculum and pedagogy, attracting qualified faculty, fostering interdisciplinary research, industry collaborations, and encouraging entrepreneurial activities among students and staff.
While pinpointing which Pakistani university will birth the first unicorn remains uncertain, some institutions show promise.
Lahore University of Management Sciences, National University of Sciences and Technology, COMSATS University Islamabad, Institute of Business Administration, and Ghulam Ishaq Khan Institute of Engineering Sciences and Technology have been consistently ranked among the top in the country. Noteworthy successes from their alumni and startup funding signal a potential for significant contributions to Pakistan’s entrepreneurial landscape.
Additionally following measures may help to overcome this problem.
Increasing Funding and Autonomy
Providing universities with more financial resources and greater autonomy involves allocating sufficient budgetary support and reducing bureaucratic constraints. This enables universities to invest in infrastructure, faculty development, and research initiatives independently. Accountability and transparency mechanisms ensure responsible use of funds and ethical governance.
Enhancing Education and Research Quality
Improving the quality and relevance of education involves revising curriculum, updating teaching methods, and ensuring that programs align with current industry needs. Fostering interdisciplinary and collaborative research encourages the integration of different academic disciplines, fostering a holistic approach to problem-solving and innovation.
Establishing Industry and Society Linkages
Creating strong connections with industry and society involves collaborative initiatives such as research partnerships, joint projects, and internship programs. Encouraging entrepreneurial and innovative activities within the university environment nurtures a culture of creativity, problem-solving, and application of knowledge in practical scenarios.
Promoting Internationalization and Diversity
Promoting internationalization includes initiatives to attract global talent, foster cultural exchange, and encourage international collaborations.
Expanding opportunities for staff and students to engage in global mobility and exchange programs facilitates exposure to diverse perspectives and enhances the university’s global reputation. This can involve exchange programs, joint degrees, and collaborative research projects with institutions worldwide.
Conclusion
In summary, fostering innovation and entrepreneurial success in Pakistan requires a dual focus on nurturing the venture funding landscape and enhancing university education.
The interconnected imperatives highlight the vital role of both robust financial support for startups and strategic improvements in educational and research practices. Collaborative efforts between the public and private sectors, coupled with educational enhancements, can position Pakistan as a hub for innovation, attracting investments and talent while driving economic growth.
By strategically aligning venture funding and educational improvements, the nation can unlock its full potential, fostering a dynamic environment where innovation and entrepreneurship can flourish, ultimately driving economic growth and global competitiveness.
