Telecom sector urges govt to scrap direct G2G contracting rule

August 31, 2026 (MLN): Pakistan's telecom operators have called for the repeal of a public procurement clause that allows state-owned entities to secure government contracts directly, warning that the provision is crowding out private sector players and undermining innovation in the technology sector.

In a letter to Finance Minister Muhammad Aurangzeb, Planning Minister Ahsan Iqbal and IT and Telecommunication Minister Shaza Fatima Khawaja, the Telecom Operators Association (TOA) whose members include Jazz, Naya Tel, PTCL, Telenor, Transworld and Ufone asked that the rule allowing direct government-to-government (G2G) contracting with state-owned entities be scrapped.

The association said the provision, introduced in 2021, permits procuring agencies to award time-sensitive, public-interest work directly to eligible state-owned organizations without competitive bidding, provided the work is carried out using the entity's own resources rather than private partners or subcontractors.

Where multiple state entities qualify, agencies are required to hold limited tendering among them and assess price reasonableness.

TOA said federal and provincial governments have since expanded existing state-owned enterprises and created dozens of new ones, which have picked up numerous IT and telecom projects over the past five years through direct contracting rather than open bidding.

It said this has crowded out private operators that have invested billions of rupees in infrastructure and services over the past two decades while contributing consistently to the tax base.

The association noted that private telecom players have also poured investment into data centers, cloud computing, artificial intelligence and digital services as the industry shifts toward becoming a global digital-services exporter, and argued that a strong domestic ecosystem is essential for local firms to compete internationally.

While government remains a major buyer of IT, telecom and digital services, TOA said a large share of that spending goes to international vendors for hardware and software, with the smaller portion once available to local private companies increasingly redirected to state-owned firms instead.

The letter outlined several concerns tied to the current framework: it leaves domestic technology firms with fewer opportunities to build a track record before pursuing export markets.

State-linked and preferred G2G contractors benefit from regulatory exemptions, preferential licensing and implicit government backing unavailable to private firms.

Reduced competition dulls incentives for private-sector research, development and entrepreneurship; and state-backed contractors have historically underperformed without competitive pressure, citing Pakistan International Airlines, Pakistan Steel Mills and power distribution companies as examples.

TOA also warned that restricting opportunities for small and medium private enterprises could hurt job creation, particularly for educated youth, and that heavy government borrowing tends to push commercial banks toward safer sovereign lending over private-sector credit, tightening financing access for SMEs.

A further concern raised was subcontracting practices after G2G awards, with the association alleging that some state-owned entities subsequently hand off projects to preferred private contractors without competitive bidding, bypassing procurement transparency requirements.

The association pointed to Prime Minister Shehbaz Sharif's public remarks that the government has no business running businesses, arguing that state-owned entities largely funded through private-sector taxes are being allowed to compete with the very taxpayers funding them while enjoying preferential access to contracts.

TOA urged that the clause be repealed and that state-owned entities compete for government-funded projects on the same terms as private companies to promote competition, transparency and growth of Pakistan's technology sector.

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