A Special Technology Zone (STZ) is a knowledge ecosystem designed on the triple helix innovation model where the government offers special incentives to catalyze the development, promotion and proliferation of latest technologies. It is a cluster where innovation is the main driver of all central and peripheral activities. Companies and individuals working to develop and proliferate technologies are themselves immersed in a smart city lifestyle. The government supports and encourages businesses to help them thrive and create wealth and seize opportunities for others at a rapid pace. People and technology companies, from near and far, are attracted to these ecosystems. Gradually, areas expand beyond their originally intended boundaries and form townships and eventually towns. In this way, any given ZTS helps the supportive government ultimately execute a broader reform agenda and bring socio-economic progress to its constituents.
Silicon Valley in California (USA) and Research Triangle Park in North Carolina (USA) are the first examples of such areas dating from the 1950s; however, at the time, these were called research parks and catalyzed by universities that housed cutting-edge technology companies. Fledgling Asian economies wanted to emulate the model and so established 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. Asian areas were catalyzed by massive government intervention because their local university and industry were not mature enough at the time. Apple, Google, Intel, Hewlett-Packard, Cisco, Huawei, Lenovo, Baidu, Tencent, and Xiaomi are examples of tech giants that have emerged from these areas. These giants now boast revenues greater than those of many sovereign countries and human resources equivalent to those of many small towns. From the 2000s and onwards, a new phenomenon was observed where entire areas were developed by private companies, such as Samsung Digital City and 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 real and viable solution for harnessing local universities and industry for the wider socio-economic benefit of the country. These solutions have never really allowed the industry, and in particular the technology industry, to truly play its role in national development. The missing part was a set of specifically tailored and holistic incentives. While the Special Economic Zones (SEZ) model offered the closest set of incentives, however, in the Pakistani context, SEZs were far from urban centers and universities. In other words, it can be said that the needs of the technological sector and the ZES model had a mismatch of the factors of production.
The Special Technology Zones Authority (STZA) Act 2021 changed this mismatch – the industry now has the driver’s seat thanks to unprecedented incentives and technology-specific programming in the development of policies and systems. A veritable pivot, in letter and in spirit, has taken place to propel the industry to the forefront of the triple helix. In support of all this, the STZA Authority is the architect, facilitator, as well as regulator of the ecosystem. STZA, since becoming a legal entity, has not only obtained major incentives (corporate tax and customs duty exemptions for 10 years, special provisions on foreign exchange, subsidized land and public services, and much more), but also created a system of rules, regulations and other legal provisions. provisions that will allow it to support the technology industry in a specialized way. Relationships with other government agencies (OGAs) in all units of the federation and national and international support entities were also forged.
Outreach to local and foreign tech entities has been successful, and several tech giants have started discussions to enter STZs, which will form anchors for other companies. Applications for Zone Developer (ZD) and Zone Enterprise (ZE) licenses have been opened and a large number of applications have been received in various technological fields, which will lead to significant investments and contribute to the strategic objectives of the Authority. Strategic objectives include technology transfer, technology exports, import substitution, job creation, human capital development, R&D and innovation.
A typical 100-acre urban area is expected to attract the equivalent of USD 1 billion in investment and generate an equivalent annual activity of USD 1.6 billion for GDP. The estimated investment quantum indicates that the country will attract $20 of investment for every $1 invested in land, infrastructure and connectivity. Currently, the total area of all areas that are expected to come online in the near future is 1,500 acres. Using the conservative estimates above, overall technology investments in these areas could be equivalent to USD 15 billion and economic activity equivalent to USD 24 billion (>6% of GDP) maturing in the next few years.
The first technology zone to be established is the Islamabad Technopolis, a 140-acre area in the Chak Shehzad, Islamabad. The area will host technology companies, advanced technology production units, R&D centers, universities and training centers, offices of science and technology support organizations and support services. As the operationalization of this area will take some time due to the development of the main infrastructure, arrangements for ZE tenants in a central location in Islamabad have already been made. A 300,000 square foot tower in Islamabad’s Blue Zone will house EZs working in the fields of artificial intelligence, fintech, electronics design, venture capital management and deployment, among others.
Other STZs announced following the ZD applications include Lahore Technopolis in Lahore, Pakistan Digital City in Haripur and 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 many S&T universities can direct their R&D towards technology transfer and commercialization. Besides these five zones, more than a dozen other zones are currently being studied across Pakistan.
Many STZA 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 signed a memorandum of understanding to establish a Pakistan-specific venture capital fund to support local entrepreneurs. Thanks to the President’s initiative to involve the American Diaspora, the STZA has actively attracted American companies. 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 companies will be attracted through the MoU with Skolkovo Technology Park.
The above represents a decisive opportunity for the country to accelerate its scientific and technological development. As the nationwide deployment of the zones progresses and technology companies begin to enter and operate from the zones, the impact of the STZA initiative will become visible. This impact will not be limited to a single vertical technology or a particular subject, but will apply to the entire spectrum of technologies and will be driven by contemporary and futuristic economic needs.
A new engine for Pakistan’s economic growth
The author is Director (Research & Market Intelligence) at the Special Technology Zones Authority (STZA). He specializes in technology research and policy studies and is one of the contributors to the National STI 2022 Policy.
Many STZA alliances and partnerships will lead to an influx of foreign technology companies.