KARACHI: Pakistan is expected to launch a Rs1 billion ($5.6 million) technology startup fund this month to support the South Asian country’s startup ecosystem by providing seed funding to around 50 enterprises every year, officials and insiders said on Saturday.

Prime Minister Imran Khan last month announced establishing the Pakistan Technology Startup Fund (PTSF), allowing tax exemptions and 100 percent foreign exchange retention for IT companies and freelancers registered with Pakistan Software Export Board.

“The incentive package has been approved at higher level by the prime minister and now only its mechanics and legislations are in process,” Badar Khushnood, a member of the government’s National E-Commerce Council, told Arab News on Saturday.

“Hopefully, the process will be completed within a couple of weeks and the ordinance will be promulgated within this month,” said Khushnood, who played a key role in getting approval for the incentive package.

“The major purpose is to facilitate and let the growth of the IT industry continue without any hindrance.”

PM Khan announced making changes in the policies to help startups, including the Roshan Digital IT Accounts, freelancers and IT firms to retain 100 percent foreign exchange with no restrictions on its movement, resolution of double taxation of IT sector by tax authorities and exemption from Capital Gains Tax on Venture Funding (VC) into startups.

“IT companies were allowed to keep dollar accounts but they were previously permitted to utilize only 35 percent of the amount ... now they will be able to use 100 percent without any restriction on mobilization of dollars,” Khushnood, who is also the chairman of Pakistan Software Houses Association (P@SHA), told Arab News.

“This was the big issue for IT companies which has been resolved.”

Pakistani officials calling for efficient management of funds said it would help uplift the country’s ecosystem.

“It is a great initiative. It will definitely help the overall ecosystem, but efficient management will be the key,” Omar Abedin, director of the National Incubation Center Karachi (NICK) which is part of the IT Ministry, told Arab News.

“The role of NICs is not clear, but there is an opportunity to leverage this network of incubation centers to optimize the impact of these disbursements, making sure these funds go to the most deserving and hard-working startups.”

Venture capitalists also hailed the government’s decision to exempt them from the Capital Gains Tax.

“I think this is a promising initiative by the government but it also comes down to execution and implementation,” said Kalsoom Lakhani, co-founder and general partner at i2i Ventures, a Venture Capital Fund.

“Having transparent criteria, sourcing & vetting will be key to making it possible for startups to access this type of capital, especially in the earliest stages of a company’s journey.”

Experts said many other countries had funded startups with seed and brought private investors to uplift their ecosystems.

“This is a huge development and a much-needed initiative that the government under the PM has taken,” Khurram Schehzad, CEO of Alpha Beta Core startup investment advisory platform, told Arab News.

“Many other countries have done it with investing seed and bringing in private investors to uplift the local ecosystem, addressing the society’s pain points as well as making sense commercially for all the stakeholders involved,” Schehzad said.

“The Idea was pitched to PM back in December 2021 through this platform and we worked for the maximum investor and startup benefit till its approval.”

P@SHA chairman informed that the fund, incentives and the earlier announced boot camp would help fresh graduates get required training and jobs eventually.

“25,000 to 30,000 IT students graduate every year in the country but only 10 percent are employable and 90 percent don’t get jobs mainly due to a lack of quality education,” Khushnood said, adding the new measures would help them avail job opportunities.

He informed the Rs1 billion boot camp program announced by the government to train IT graduates was also under process and would be executed before June for the improvement of the supply side of manpower.

Khushnood said the government’s incentives would help the country increase IT export to up to $4 billion next year as compared to over $2 billion achieved last fiscal year.

“The emerging situation in eastern Europe is also expected to help Pakistani IT companies because foreign companies which were outsourcing in the region would now look at Pakistan for it,” he said.

Pakistani IT experts and officials also applauded the premier’s directives to establish Special Technology Zones (STZs) on a fast-track basis, saying this was an area where progress was slow.