Ministry of Information Technology and Telecommunication (MoITT) has prepared a special package for IT sector covering enhancement in existing incentives, rationalization of duties/taxes and simplification of tax regime envisaging to promote local assembly/manufacturing of IT hardware and double software exports, it is learnt.
It is expected that the draft package would be made part of the Finance Bill (2017-18) after announcement of upcoming budget.
Official sources revealed that the IT Ministry will focus on ‘hardware development/manufacturing” as a thematic area of existing funding agencies like National ICT R&D Fund Co. to finance hardware related R&D and manufacturing proposals.
The proposed package would promote the local assembly and manufacturing of IT hardware (Desktop PCs, laptops, mobile handsets, network equipments, LEDs, microprocessors, etc). The existing special incentives package for mobile phone manufacturers in Pakistan (Finance Bill – 2015-16) will be further enhanced and such initiatives will be introduced to boost local assembling and manufacturing for a broad range of IT hardware.
Sources revealed that tax regime on raw material and local assembled IT hardware will be simplified while duties would be rationalized in line with the tariff structures in regional countries which are competing with the local hardware industry.
For public sector procurement regarding IT hardware, government will give first preference to local manufacturers to ensure local value addition. Transfer management control of existing manufacturing concerns in the public sector to the private sector through equity participation or long-term lease, is also part of the package.
MoIT will collaborate with existing platforms of federal and provincial governments such as NAVTTC, TEVTA etc to launch specific skill development programs for local work-force on assembling processes, tools and technologies.
The Ministry would work with relevant stakeholders regarding accession to Information Technology Agreement (ITA) under the framework of WTO in-line with necessities of local hardware manufacturing industry.
The government will pursue all measures including legislative, policy, administrative and international marketing measures to double software exports by 2020, create jobs and contribute towards the government’s efforts to increase overall IT exports and remittances.
Pakistan’s IT exports have grown many folds over the past decade to $2.4 billion. In addition, annual revenues from freelancing and the domestic markets are $90-100 million and $500 million respectively. Hence, the total annual revenue of Pakistan’s IT Industry is nearing $3 billion mark.
The Ministry has targeted to concentrate on emerging areas of mobile application development, responsive web applications, big data analytics, Internet of things (IoTs) and cloud computing to leverage existing competencies in Pakistani IT industry and to improve its export potential.
The government would promote domestic software market through public projects and procurement by adopting best practices for facilitating local firm participation.
As per the package, Pakistani Diasporas in the North American, European and Middle Eastern markets would be utilized to enable inclusion of young Pakistani IT entrepreneurs into the global IT value chain, provide enabling environment for companies to set up venture capital funds, accelerators and other support mechanisms for start-up companies.
The Ministry would work with relevant stakeholders on continual basis including FBR, Finance Division and provincial revenue authorities for preferential tax treatment of IT industry, maintain a database by conducting market surveys regarding IT companies’ annual exports, domestic revenues, HR strengths and areas of technical expertise etc.
Further the Ministry would pursue the placement of ICT business development experts at Pakistani embassies, commercial consulates, and offices of Trade Development Authority of Pakistan (TDAP) to promote and showcase Pakistani IT products and services while for some large markets, such as North America, Europe, and Middle East, dedicated consultants to be hired to spearhead the market development and promotional efforts.
The government would encourage equity participation of banks in software projects by setting up venture capital funds. The necessary changes in legislation are being carried out by the SECP (Securities and Exchange Commission of Pakistan).
The government would earmark sufficient additional funds and support infrastructure for PSEB to perform its role effectively in promoting IT exports by encouraging Pakistani IT companies’ participation in international IT events, trade fairs and exchange of IT delegations. The Ministry has targeted to attract local investors and business groups to invest in software industry through a comprehensive incentive program.