3G spectrum to raise GDP by at least Rs380 billion
KARACHI: The launch of 3G/4G spectrum is likely to generate 990,000 jobs and create additional GDP between Rs.380billion and Rs.1,180 billion in the period up to 2020 in a high demand scenario according to a report by the UK based Plum Consulting, the News learnt on Saturday.
Commissioned by the Pakistan government, the report titled “The economic and Social benefits of 3G in Pakistan” says the coming of 3G technology will herald a economic revolution in several Pakistani industries.
Chairman PTA Dr Syed Ismail Shah cited the report in a recent story published by the Wall Street Journal.
With spectrum release the net present value of additional GDP up to 2020 is Rs1,180 billion in the high demand scenario and Rs490 billion in the low demand scenario, it said, adding that this is equivalent to an average of 0.13 percentage points increase in the annual GDP growth rate over this period.
Use of 3G broadband services will also provide a wide range of social benefits, as well, in the field of education, healthcare, etc, it said.
Economic studies have shown that there is a positive relationship between broadband penetration and GDP growth in both high and low income countries.
Estimates of the impact of a 10 percentage points increase in the broadband penetration on GDP growth rates range from 0.1 to 1.5 percentage points, with higher impacts found in the lower income countries.
The report have used a conservative estimate of 0.5 percentage points and assumed this impact in the lasts three years.
This additional GDP could yield additional tax revenue in the range of Rs23 billion and Rs70 billion in net present value terms for the government, it said.
There are two potential sources of increase in government revenues, an increase in tax revenues and payments for spectrum.
As broadband is a general purpose technology, it has the potential to bring significant benefits across the economy and so it is expected that the release of spectrum for mobile broadband will have a positive impact on employment across agriculture, industry and services sectors.
To estimate this impact, we take the average ratio of jobs to GDP and multiply this by the additional GDP generated by the release of spectrum.
For example, in 2018, spectrum release generates Rs297 billion in additional GDP (under the high demand scenario) and this leads to an estimated increase in employment of up to around 900,000 jobs, it said.
The increased taxes arise as a result of the general stimulus to economic activity, ie, they derive from taxes paid by all sectors of the economy.
The net present value of the additional tax revenues ranges from Rs29 billion to Rs71 billion.
Auction revenues from the 2.1GHz award could range from Rs102 billion to Rs180 billion, it said.
Several countries in the region were already reaping the benefits of mobile broadband connectivity. In India, the availability of mobile broadband means that healthcare can be more quickly and effectively delivered to residents in the rural areas through mobile telemedicine units.
Similarly, in Pakistan, 3G services could support improved education and healthcare delivery and could enhance public health initiatives such as the dengue tracking system.
It is imperative that the government realises the benefits by assigning the 2.1 GHz spectrum, it said, adding that further delay will be costly.
It is estimated that a two-year delay will result in a loss of up to Rs4,402 billion to GDP, equivalent to a loss of at least Rs5 billion per month for the next seven years.
Correspondingly, there will also be a loss of tax revenue of up to Rs263 billion, equivalent to a loss of at least Rs300 million per month for the next seven years, it said.
Delay in the release of spectrum means these benefits will be postponed and this results in a loss in both GDP and employment creation.
The report does not extend the forecasts beyond 2020 on the grounds that the networks are at full capacity by that time – this is why the growth in the number of subscribers is forecast to taper off at the end of the forecast period.
It can reasonably be expected that if additional spectrum were released by 2020, then subscriber numbers would continue to grow.
Shariq ur Rehman, country head, Pakistan and SAGE West Oracle Corporation, said that once the 3G/4G spectrum launched, it will be a game changer for all the sectors, particularly for IT and telecom.
“We are still struggling with the connectivity infrastructure issues, as the real broadband penetration in the country is still missing.”
He said that it will facilitate several IT-related businesses and further boast the sector, as there are a lot new and exciting products and services, which can only be introduced only when the 3G/4G spectrum is launched in Pakistan.
Tahir Saeed, an analyst at Topline Research, said that the much-awaited licence auction will bode well for all stakeholders, ie, government, telecom operators and the subscribers.
Telecom subscribers will be able to experience better telecom services, while telecom operators will get a chance to improve subscriber base and ARPUs.
It will also help in flourishing mobile base services by other industries (like mobile banking), he said.
On the government side, it will immediately generate around $0.8 billion to the national kitty, assuming all bidding finalised at base price and the telecom operators opt to pay only 50 percent, he added. —Hina Mahgul Rind