Pakistan’s tech industry is facing a significant threat as the government moves to establish a China-style internet firewall, raising concerns among entrepreneurs and investors alike. Ahmed Khan, founder of last-mile delivery startup Cheetay, is among the many tech leaders struggling with the country’s shifting digital policies. After previously co-founding Daraz, which was acquired by China’s Alibaba in 2018, Khan felt confident about Cheetay’s potential success. However, recent developments, including economic instability and the government’s plans for a firewall, have led him to shut down his company.

Cheetay’s Rise and Fall

Cheetay, once a promising venture, raised $30 million in funding and expanded into grocery delivery, even winning multiple tech industry awards in 2019. But the company faced setbacks due to the post-COVID-19 financial crisis and dwindling investor confidence amidst Pakistan’s economic downturn. “Our investors no longer feel it is worth their money,” Khan said. His struggle reflects the broader challenges faced by Pakistan’s tech entrepreneurs as global investors shy away from a country marked by internet disruptions and political instability.

The Firewall’s Impact on Pakistan’s Digital Future

In July 2023, the Pakistani government announced the creation of an internet firewall aimed at boosting cybersecurity. However, the move has sparked widespread opposition from digital rights activists and the tech industry, who argue that the firewall will enable government control over online content. Many entrepreneurs believe it will isolate Pakistan from the global digital ecosystem, stifling innovation and making it difficult to attract international investment.

“The restrictions are just unbearable for the tech industry,” Khan explained. “Who would want to invest in Pakistan right now?”

Concerns Over Economic Consequences

The Pakistan Software Houses Association, the country’s leading tech industry body, estimates that the firewall could cost the economy $300 million. Pakistani entrepreneurs worry the firewall could have devastating effects on the country’s burgeoning tech industry, which contributes 1% of Pakistan’s GDP and over 10% of its annual exports, generating more than $3.2 billion in revenue. Freelance tech workers, who make up 15% of the industry’s workforce, are also expected to be hit hard by the increased internet restrictions.

Comparisons to China and Lack of Local Alternatives

Pakistan’s firewall is drawing inevitable comparisons to China’s sophisticated internet control system, but experts argue that Pakistan lacks the necessary infrastructure to support such a move. “China has built the world’s largest cloud and the biggest online marketplace, Alibaba,” said Mudassir Malik, a member of the Pakistan Software Houses Association’s central executive committee. “Pakistan’s payment processes, banking channels, and standard applications are all international. The country cannot reap any benefits from a firewall.”

Unlike China, which has developed domestic alternatives to global platforms such as Baidu and WeChat, Pakistan lacks local substitutes for essential services like PayPal, which is not available in the country. “In Pakistan, we have no such alternatives,” said digital rights activist Tehreem Azeem, who pointed out that freelancers are particularly affected by the lack of global payment platforms.

Tech Industry Disruptions and Slowing Internet Speeds

Since the government announced plans for the firewall, internet users in Pakistan have reported slower speeds, with issues particularly affecting WhatsApp, one of the country’s most widely used messaging apps. According to the Wireless and Internet Service Providers Association of Pakistan, internet speeds have dropped by up to 40%, significantly disrupting businesses, call centers, and e-commerce platforms.

Despite government denials, activists and experts believe these disruptions are linked to the firewall’s installation. The government has attributed the slow speeds to other causes, such as a faulty undersea cable and overuse of virtual private networks (VPNs).

Deterred Investment and a Threat to Pakistan’s Startup Ecosystem

Political instability, internet disruptions, and the looming firewall have made Pakistani startups less attractive to global investors. Misbah Naqvi, co-founder of venture capital fund i2i Ventures, emphasized that the perception of risk is growing. “The internet disruption creates a greater perception of risk for investors, especially those outside the country. This would lead to investors preferring other markets where technology infrastructure is more reliable.”

The recent disruptions are exacerbating an already precarious situation for Pakistan’s tech sector, which has struggled to gain momentum due to political and economic challenges. The firewall may ultimately benefit Chinese companies, as weakening domestic startups could allow China to further strengthen its foothold in Pakistan’s tech space, following Alibaba’s acquisition of Daraz.

Conclusion: A Clouded Future for Pakistan’s Tech Industry

As Pakistan moves forward with its controversial firewall, the future of its tech industry hangs in the balance. While the government insists the firewall is not intended for censorship, many in the tech community remain unconvinced. “What’s happening with the firewall in Pakistan is a very negative signal to already on-the-fence international investors,” said Ambareen Baig, head of research at startup accelerator Accelerate Prosperity.

Without a clear plan to address the concerns of the tech industry, Pakistan risks losing valuable foreign investment and hindering the growth of its digital economy at a time when global connectivity is more critical than ever.