A Special Technology Zone (STZ) is a knowledge ecosystem designed on the triple helix model of innovation where the government offers special incentives to catalyse the development, promotion, and proliferation of the latest technologies. It is a cluster where innovation is the primary driver of all core and peripheral activities. The enterprises and individuals working to develop and proliferate technologies are themselves immersed in a smart city lifestyle. The government supports and incentivises enterprises to help them to thrive and create wealth and avail opportunities for others at a fast pace. People and technology enterprises, from near and afar, are attracted to these ecosystems. Gradually, the Zones expand beyond their originally intended boundaries and form townships and eventually cities. In this way, any given STZ helps the supporting government to ultimately execute a broader reform agenda and deliver socioeconomic progress to their constituents.
The Silicon Valley in California (USA) and Research Triangle Park in North Carolina (USA) are the earliest examples of such zones from the 1950s; however, at the time these were referred to as Research Parks and catalysed by universities which hosted cutting edge technology firms. The budding Asian economies wanted to emulate the model and therefore created the Zhongguancun Science Park (Z-Park) in Beijing (China), Shenzhen Special Economic Zone in Shenzhen (China) and Daedeok Innopolis in Daejeon (South Korea) in the 1970s. The Asian zones were catalysed by massive government intervention as their local academia and industry were not mature enough at the time. Examples of technology giants which emerged from such zones include Apple, Google, Intel, Hewlett-Packard, Cisco, Huawei, Lenovo, Baidu, Tencent, and Xiaomi. These giants now boast revenues larger than many sovereign nations and human resource headcounts equivalent to many small cities. From the 2000s and onward, a new phenomenon was seen where entire zones were developed by private enterprises, such as the Samsung Digital City and the LG Science City (both in South Korea).
Industry-Academia collaboration has been discussed in Pakistan for several decades; however, none of the proposed models provided a true and workable solution to harnessing local academia and industry for the broader socio-economic benefit of the country. These solutions never really enabled industry, and in particular, the technology industry, to truly play their role in national development. The missing part was a specifically tailored and holistic incentives package. Whereas the Special Economic Zones (SEZ) model provided the closest set of incentives, however, in the Pakistani context, the SEZs were far away from urban centres and academia. In other words, we can say that the needs of the technology sector and the SEZ model had a mismatch of the factors of production.
The Special Technology Zones Authority (STZA) Act 2021 has changed this mismatch—the industry has now been given the driving seat through unparalleled incentives and technology-specific programming in policy and systems development. A true pivot, in letter and spirit, has taken place to shift the industry to the forefront in the triple helix. In support of all of this, the Authority STZA is the architect, the facilitator, as well as the regulator of the ecosystem. STZA, since becoming a legal entity has not only obtained major incentives (10-year corporate tax and custom duty waivers, special forex provisions, subsidised land and utilities, and much more) but also created a system of rules, regulations, and other statutory provisions which will enable it to support the technology industry in a specialised way. Relationships with other government agencies (OGAs) in all units of the federation and national and international support entities have also been forged.
Outreach to local and foreign technology entities has been fruitful and several technological giants have been engaged in discussions to enter the STZs, which will form anchors for other enterprises. Applications for Zone Developer (ZD) and Zone Enterprise (ZE) licenses have been opened and a large number of applications have been received in diverse technological fields which will bring in sizable investment and contribute to the strategic objectives of the Authority. The strategic objectives include the transfer of technology, technology exports, import substitution, job creation, human capital development, R&D, and innovation.
A typical urban 100-acre zone is expected to attract the equivalent of USD 1 Bn of investments and generate an equivalent annual activity of USD 1.6 Bn for the GDP. The quantum of investment estimated indicates that the country will attract 20 dollars of investment for each dollar invested in land, infrastructure, and connectivity. At the moment, the total area of all expected zones coming online in the near future is 1500 acres. Utilising the above conservative estimates, the overall technology investments in these zones could be equivalent to USD 15 Bn and economic activity equivalent to USD 24 Bn (> 6 percent of GDP) maturing in the next several years.
The first Technology Zone to be established is the Islamabad Technopolis—a 140-acre zone in the Chak Shehzad, Islamabad. The zone will host technology companies, advanced tech production units, R&D centres, universities and training centers, offices of science and technology support organisations, and support services. Since the operationalisation of this zone will take some time due to trunk infrastructure development, the arrangements for ZE tenants in a central location in Islamabad have already been made. A 300,000 sq ft tower in Blue area Islamabad will house ZEs working in the areas of Artificial Intelligence, Financial technologies, Electronics Design, Venture Capital management and deployment, amongst others.
Other STZs announced as a result of ZD applications include Lahore Technopolis in Lahore, Pakistan Digital City in Haripur, and the Pak-Austria Fachhochschule Institute of Applied Sciences and Technology (PAF-IAST) in Haripur. PAF-IAST also happens to be the first university to apply for a ZD license and since then many others have applied. This represents a transformative aspect where numerous S&T universities can move their R&D towards technology transfer and commercialisation. Besides these five zones, over a dozen other zones are presently under consideration across Pakistan.
Many of STZA’s alliances and partnerships will lead to an influx of foreign technology companies. Mastercard and STZA have signed a Digital Country Partnership for cashless zones and digital payment solutions for SMEs. Shorooq Partners, which is a MENAP focused venture capital firm, and STZA have signed a Memorandum of Understanding (MoU) with plans to have a Pakistan-specific venture capital fund to support local entrepreneurs. Through the President’s initiative of engaging the USA diaspora, STZA has actively attracted enterprises from the USA. Several agreements with Chinese associations such as Zhongguancun Belt & Road Industrial Promotion Association (ZBRA) and Z-Park have paved the way for attracting Chinese technology companies to Pakistan. Similarly, Russian technology enterprises will be attracted via the MoU with Skolkovo Technology Park.
The above represent a watershed opportunity for the country to accelerate its scientific and technological development. As the national rollout of zones progresses and technology enterprises begin entering and operating from the zones, the impact of the STZA initiative will become visible. This impact will not only be restricted to one technology vertical or a particular subject, rather it will be across the entire spectrum of technologies and driven by contemporary and futuristic economic needs.
A new engine for Pakistan’s economic growth
The writer is Director (Research & Market Intelligence) at the Special Technology Zones Authority (STZA). He specialises in technology research and policy studies and is one of the contributors to the National STI Policy 2022.
Many of STZA’s alliances and partnerships will lead to an influx of foreign technology companies.
The Silicon Valley in California (USA) and Research Triangle Park in North Carolina (USA) are the earliest examples of such zones from the 1950s; however, at the time these were referred to as Research Parks and catalysed by universities which hosted cutting edge technology firms. The budding Asian economies wanted to emulate the model and therefore created the Zhongguancun Science Park (Z-Park) in Beijing (China), Shenzhen Special Economic Zone in Shenzhen (China) and Daedeok Innopolis in Daejeon (South Korea) in the 1970s. The Asian zones were catalysed by massive government intervention as their local academia and industry were not mature enough at the time. Examples of technology giants which emerged from such zones include Apple, Google, Intel, Hewlett-Packard, Cisco, Huawei, Lenovo, Baidu, Tencent, and Xiaomi. These giants now boast revenues larger than many sovereign nations and human resource headcounts equivalent to many small cities. From the 2000s and onward, a new phenomenon was seen where entire zones were developed by private enterprises, such as the Samsung Digital City and the LG Science City (both in South Korea).
Industry-Academia collaboration has been discussed in Pakistan for several decades; however, none of the proposed models provided a true and workable solution to harnessing local academia and industry for the broader socio-economic benefit of the country. These solutions never really enabled industry, and in particular, the technology industry, to truly play their role in national development. The missing part was a specifically tailored and holistic incentives package. Whereas the Special Economic Zones (SEZ) model provided the closest set of incentives, however, in the Pakistani context, the SEZs were far away from urban centres and academia. In other words, we can say that the needs of the technology sector and the SEZ model had a mismatch of the factors of production.
The Special Technology Zones Authority (STZA) Act 2021 has changed this mismatch—the industry has now been given the driving seat through unparalleled incentives and technology-specific programming in policy and systems development. A true pivot, in letter and spirit, has taken place to shift the industry to the forefront in the triple helix. In support of all of this, the Authority STZA is the architect, the facilitator, as well as the regulator of the ecosystem. STZA, since becoming a legal entity has not only obtained major incentives (10-year corporate tax and custom duty waivers, special forex provisions, subsidised land and utilities, and much more) but also created a system of rules, regulations, and other statutory provisions which will enable it to support the technology industry in a specialised way. Relationships with other government agencies (OGAs) in all units of the federation and national and international support entities have also been forged.
Outreach to local and foreign technology entities has been fruitful and several technological giants have been engaged in discussions to enter the STZs, which will form anchors for other enterprises. Applications for Zone Developer (ZD) and Zone Enterprise (ZE) licenses have been opened and a large number of applications have been received in diverse technological fields which will bring in sizable investment and contribute to the strategic objectives of the Authority. The strategic objectives include the transfer of technology, technology exports, import substitution, job creation, human capital development, R&D, and innovation.
A typical urban 100-acre zone is expected to attract the equivalent of USD 1 Bn of investments and generate an equivalent annual activity of USD 1.6 Bn for the GDP. The quantum of investment estimated indicates that the country will attract 20 dollars of investment for each dollar invested in land, infrastructure, and connectivity. At the moment, the total area of all expected zones coming online in the near future is 1500 acres. Utilising the above conservative estimates, the overall technology investments in these zones could be equivalent to USD 15 Bn and economic activity equivalent to USD 24 Bn (> 6 percent of GDP) maturing in the next several years.
The first Technology Zone to be established is the Islamabad Technopolis—a 140-acre zone in the Chak Shehzad, Islamabad. The zone will host technology companies, advanced tech production units, R&D centres, universities and training centers, offices of science and technology support organisations, and support services. Since the operationalisation of this zone will take some time due to trunk infrastructure development, the arrangements for ZE tenants in a central location in Islamabad have already been made. A 300,000 sq ft tower in Blue area Islamabad will house ZEs working in the areas of Artificial Intelligence, Financial technologies, Electronics Design, Venture Capital management and deployment, amongst others.
Other STZs announced as a result of ZD applications include Lahore Technopolis in Lahore, Pakistan Digital City in Haripur, and the Pak-Austria Fachhochschule Institute of Applied Sciences and Technology (PAF-IAST) in Haripur. PAF-IAST also happens to be the first university to apply for a ZD license and since then many others have applied. This represents a transformative aspect where numerous S&T universities can move their R&D towards technology transfer and commercialisation. Besides these five zones, over a dozen other zones are presently under consideration across Pakistan.
Many of STZA’s alliances and partnerships will lead to an influx of foreign technology companies. Mastercard and STZA have signed a Digital Country Partnership for cashless zones and digital payment solutions for SMEs. Shorooq Partners, which is a MENAP focused venture capital firm, and STZA have signed a Memorandum of Understanding (MoU) with plans to have a Pakistan-specific venture capital fund to support local entrepreneurs. Through the President’s initiative of engaging the USA diaspora, STZA has actively attracted enterprises from the USA. Several agreements with Chinese associations such as Zhongguancun Belt & Road Industrial Promotion Association (ZBRA) and Z-Park have paved the way for attracting Chinese technology companies to Pakistan. Similarly, Russian technology enterprises will be attracted via the MoU with Skolkovo Technology Park.
The above represent a watershed opportunity for the country to accelerate its scientific and technological development. As the national rollout of zones progresses and technology enterprises begin entering and operating from the zones, the impact of the STZA initiative will become visible. This impact will not only be restricted to one technology vertical or a particular subject, rather it will be across the entire spectrum of technologies and driven by contemporary and futuristic economic needs.
A new engine for Pakistan’s economic growth
The writer is Director (Research & Market Intelligence) at the Special Technology Zones Authority (STZA). He specialises in technology research and policy studies and is one of the contributors to the National STI Policy 2022.
Many of STZA’s alliances and partnerships will lead to an influx of foreign technology companies.
