Pakistan’s IT exports reached an all-time high for the outgoing financial year of 2016-17 with receipts of nearly $1 billion received through the banking channel.
According to the statistics provided by the State Bank of Pakistan, exports of IT industry classified as telecommunication, computer and information services surged to the level of $938.640 million in the last financial year.
The exports earning of the IT industry registered a double digit growth of 19 percent or $ 150 million from the financial year 2015-16 which stood at $788.640 million.
Exports of IT or ICT services – in broad terms – are largely delivered to countries and regions such as USA, Middle East and South African countries.
Pakistan Software Export Board (PSEB), on the other hand, reported 3 times higher exports as compared to SBP’s numbers ($2.81 billion) through the input of companies/software houses.
PSEB’s estimation is based on the services various IT companies and software houses rendered to different countries but their reporting is done in different sectors such as financial services, healthcare sector and etc, as well as e-commerce, e-health and e-education.
Besides, the reporting of the freelance work is usually reported through overseas remittances. It should be mentioned that Pakistan is considered as the fourth largest freelance market in the world. The estimation of PSEB suggested that exports of freelancer of IT sector stands at more than $200 million per year.
Hence, the foreign exchange inflows in IT sector is not reported as its original potential.
Breakup of IT industry Exports of Services and Products
Source: State Bank of Pakistan
IT and Telecommunication is counted as a single industry in Pakistan either under one ministry, or by reporting the inflows of this sector.
SBP Is Working To Streamline IT Forex Inflows
State Bank of Pakistan has taken a series of concrete steps to streamline exports income of the IT industry through the banking sector, which could reduce the under-reporting foreign exchange earning of IT and its enabled services.
The implementation of the instructions of the central banks to commercial banks and software houses will lead to identify the nearest figure of IT exports values on monthly and annually basis, which will also help all stakeholders to realize the potential and status of IT sector in the country.
6-Year Exports at a Glance
Source: State Bank of Pakistan
IT industry has the biggest potential in Pakistan with a capacity to expand itself domestically and internationally for exports of services when it comes to support of the government through policies and tax incentives.
Government’s Incentives for IT Sector
The government realizes that it has an important role in providing a conducive environment for the growth of the IT industry through infrastructure and HR development. The government has set a vision to enhance the exports of this sector to $5 billion per annum by 2020, which is not an impossible target.
The government has laid down its vision for the IT sector and proposed the following steps to aid in its growth:
- Zero income tax on IT exports till June 2019
- 100 percent equity ownership allowed to foreign investors
- 100 percent repatriation of capital and dividends allowed
- 7 year tax holiday for venture capital funds.
The measures of the central bank for streamlining forex inflows in IT sector coupled with the government policies are likely to give impetus to IT companies and software houses especially to enhance the exports of different services and products worldwide.
IT Parks and CPEC
Besides, a number of IT parks are being developed in the country along with continuous expansion of broadband services in the different cities to make the ecosystem an attractive and lucrative for IT companies, entrepreneurs and starter-ups.
Hopefully, Pakistan companies having offshore offices and those which park their revenues and investments in different countries will reap the benefits of incentives and business opportunities in Pakistan at times the foreign companies are looking for making their investments in Pakistan with the development of China Pakistan Economic Corridor (CPEC).