The International Finance Corporation (IFC) of the World Bank Group has launched a new $225 million platform to help support the growth of digital economies in Pakistan and countries of Africa, the Middle East and Central Asia. The platform is intended to build on the IFC’s investments and efforts to build tech ecosystems in these regions through initiatives such as the IFC Startup Catalyst Programme.

The tech industry has a lot to offer for Pakistan and these other countries, however in 2021, these regions collectively received less than 2 percent of $643 billion of global venture capital funding. This is primarily because access to capital was harder due to the slowdown in global venture capital investment, Covid, and the rise in food and supply chain costs. Against this backdrop, this is a timely and very important initiative on part of the IFC which will help strengthen venture capital ecosystems and invest in early-stage companies addressing development challenges through technological innovations in climate, health care, education, agriculture, e-commerce, and other sectors.

For Pakistan in particular, digital transformation can unlock up to $59.7 billion in annual economic value by 2030, equivalent to about 19 percent of the country’s GDP. However, the absence of a clear national digital mandate in Pakistan has not allowed the country to fully leverage digital FDI. While three sectors—telecom, tech-based startups, and information and IT—have traditionally been on the receiving end of most of the investment, there is still ample room for expanding the scope of investments within the digital ecosystem. A major persisting barrier in realizing this opportunity is the low digital adoption in Pakistan as compared to its regional and global counterparts.

Even though increased mobile penetration has played an important role in improving connectivity, internet and broadband penetration has been relatively slow. While this could be viewed as a point of concern for foreign investors, it can also be viewed as an opportunity for expanding the digital infrastructure of the country to unlock tremendous gains.

However, to ensure a sustained inflow of funding, it is essential for Pakistan to create and update policies and regulations that enable a friendly digital investment ecosystem. Existing barriers to FDI inflows include fluctuating business environments and underdeveloped infrastructure, both of which can be addressed through a facilitative institutional and legal architecture.