Pakistan

Pakistan’s telecom industry has launched a strong challenge against a government procurement mechanism that allows state owned entities to secure public contracts without open competitive bidding. The Telecom Operators Association has warned that the policy is increasingly shutting private companies out of government funded technology projects and could weaken competition, innovation and investment. In a letter addressed to Finance Minister Muhammad Aurangzeb, Planning Minister Ahsan Iqbal and IT and Telecommunication Minister Shaza Fatima Khawaja, the association urged the government to repeal the provision permitting direct government to government contracting with eligible state owned organizations. The demand puts a major question before policymakers. If the government claims that Pakistan’s future depends on digital transformation, artificial intelligence, cloud computing and technology exports, why should private companies that have invested billions in the country’s digital infrastructure be denied a fair opportunity to compete for government work? Telecom Operators Pakistan Say State Firms Are Crowding Out Private Companies The disputed procurement provision was introduced in 2021. It allows procuring agencies to directly award certain time sensitive and public interest projects to eligible state owned organizations without competitive bidding, provided the work is undertaken using the organization’s own resources rather than private partners or subcontractors. Where several state owned entities qualify, limited tendering is required among them and authorities are expected to determine whether the proposed price is reasonable. The Telecom Operators Association argues that the problem has grown because federal and provincial governments have expanded existing state owned enterprises and established numerous new entities. According to the association, these organizations have secured a growing number of IT and telecom projects over the past five years through direct contracting. For private operators, this creates a particularly uncomfortable situation. Companies such as Jazz, PTCL, Telenor, Ufone, Naya Tel and Transworld have invested heavily in networks, data infrastructure and digital services while paying taxes and operating under commercial pressures. Government Procurement Could Undermine Pakistan’s Digital Ambitions The association’s argument goes beyond individual contracts. It says government procurement can help domestic technology companies develop references, expertise and financial strength before competing in international markets. That opportunity becomes critical as Pakistan attempts to transform from a traditional telecom market into a broader digital services economy. Private companies are increasingly investing in data centers, cloud computing, artificial intelligence and other digital technologies. If government spending is diverted away from competitive domestic firms, the industry could lose an important source of growth at precisely the time Pakistan wants to increase technology exports. There is also a broader competition concern. State owned organizations can possess advantages that private companies do not have, including government backing, regulatory privileges and preferential access to public contracts. This creates what can effectively become an uneven playing field. Direct G2G Contracting Raises Transparency Questions One of the most serious allegations concerns subcontracting. The Telecom Operators Association claims that some state owned entities receive projects through direct G2G arrangements and later transfer portions of the work to preferred private contractors without conducting competitive procurement. If such practices are occurring, the issue deserves much greater scrutiny. A procurement system cannot reasonably claim to protect transparency merely because the initial contract is awarded to a state owned entity. If the actual implementation is eventually performed by private companies selected without open competition, the government could simply be moving the noncompetitive part of the process one step further down the chain. This is an area where independent audits and public disclosure would be far more useful than assurances. Telecom Operators Pakistan Warn of Jobs and SME Impact The association also warned that reduced access to government projects could particularly hurt small and medium sized technology businesses. Government contracts often provide companies with the revenue, references and credibility required to expand. Losing that pathway could restrict entrepreneurship and job creation, especially for educated young Pakistanis entering the technology sector. The association also linked the procurement issue to Pakistan’s broader financing environment. Heavy government borrowing encourages banks to favor sovereign lending, potentially leaving SMEs with fewer affordable financing options. If government procurement simultaneously becomes less accessible to these companies, the pressure on smaller technology firms could intensify. What Should the Government Do Next? The government’s response will be important because this dispute is ultimately about more than telecom contracts. It concerns the role of the state in Pakistan’s emerging digital economy. The association has proposed a straightforward solution: state owned entities should compete with private companies on equal terms whenever they seek government funded projects. That approach deserves serious consideration. If a state owned company can genuinely deliver better quality at a lower price, competitive procurement should allow it to win. If it cannot, taxpayers should not be forced to finance inefficient businesses simply because they have government ownership. Pakistan has repeatedly struggled with inefficient state owned enterprises, including Pakistan International Airlines, Pakistan Steel Mills and loss making power distribution companies. The telecom industry’s criticism therefore touches a much wider policy problem: protecting state institutions from competition can preserve them, but it does not necessarily make them efficient. Prime Minister Shehbaz Sharif has himself argued that the government has no business running businesses. The procurement policy now faces a test of whether that principle is being applied consistently. For Pakistan’s technology sector, the stakes are significant. A competitive procurement system could encourage investment, innovation and exports. A preferential system could instead deepen the divide between state backed organizations and the private companies expected to drive the country’s digital future. The government should therefore publish data on contracts awarded under the G2G mechanism, disclose any subsequent subcontracting arrangements and demonstrate that taxpayers are receiving value for money. Without such transparency, concerns over preferential treatment will continue to grow.