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Pakistani companies say this month’s internet outages have hurt their business and spooked investors at a time when the country is counting on the IT sector to help break a vicious cycle of economic crises and bailouts.
The warnings from executives, investors and a leading IT organization come as internet regulators report a significant slowdown in connection speeds and service interruptions on applications such as WhatsApp, the Meta-owned messaging platform that is widely used in the country.
Nadeem Elahi, managing director of TRG, a venture capital firm that runs Pakistan’s largest outsourcing services provider, said internet connectivity was “by far the worst in the last 12 months.”
“If we want to be a global business hub, 100 percent reliable connectivity is essential for customers,” he said, estimating that connection quality had deteriorated by 30 to 40 percent.
Technology is one of Pakistan’s few standout sectors, and Islamabad is relying on software developers and IT freelancers to pull the country out of a chronic foreign exchange crisis that has driven it to the IMF for aid two dozen times. According to the State Bank of Pakistan, IT exports rose 24 percent to $3.2 billion in the 12 months to the end of June, an all-time high.
Kalsoom Lakhani, co-founder of i2i Ventures, a Pakistan-focused venture capital fund, said internet slowdowns were hurting “market perception.”
“Platform bans and internet slowdowns add to this uncertainty, especially because the reasons for them seem unclear and draconian. They also prove that Pakistani startups are a riskier venture,” she said.
“How can one invest in technology start-ups in a market where digital access is so often throttled?” she added, lamenting that investments had dried up to a trickle for three years, before the recent bout of economic crisis and political instability in Pakistan.
Internet users in Pakistan have been reporting slower speeds and problems sending photos, videos and other content via WhatsApp over cellular networks since mid-August. Authorities have already blocked access to messaging platform Telegram and social media site X on national security grounds.
Digital rights activists believe the disruption is due to the government installing “firewall” technology to filter content. “As far as we know, the technology is supplied by a foreign government company,” said Usama Khilji, director of Bolo Bhi, a digital rights organization.
Prime Minister Shehbaz Sharif’s government has denied responsibility, with officials blaming the slow speeds on a faulty undersea cable, a cyberattack and excessive use of virtual private networks to circumvent restrictions on some social media platforms.
However, Information Technology Minister Shaza Fatima Khawaja confirmed at a press conference this month that the government was working to modernize its web management system to protect Pakistan from “cyber security attacks.”
When asked by the Financial Times this week, Pakistan’s Finance Minister Muhammad Aurangzeb acknowledged that there may be “temporary disruptions” to internet service.
From a business perspective, the government’s efforts to introduce internet filters could also create compliance issues for companies operating in Pakistan.
“If data is leaked at any level, there is a potential liability of millions of dollars for IT companies doing business with the West,” said Ali Ihsan, vice chairman of P@sha, an IT association representing about 800 companies in Pakistan, citing European data protection rules.
P@sha estimates that the internet outage of the past few weeks has caused economic damage of $300 million, including reputational loss and lost future business.
The industry outcry comes on top of long-standing allegations by human rights activists and opposition politicians that the state is censoring online activism, particularly criticism of the military’s role in politics.
“If you slow down the internet, you are violating a fundamental human right under UN resolutions,” said Nighat Dad, a technology and human rights activist. “We are talking about constitutional rights, accessibility and transparency.”
