Freelancers Make Up 20% of All IT Exports from Pakistan

Pakistan is one of the most active freelancer markets in the world with estimated exports of half a billion dollars every year, said a report by State Bank of Pakistan.

According to SBP’s estimates, the share of freelancers providing IT and IT-enabled services to their international clients is about 20 percent of the overall IT exports, which stand at $2.5 billion through the formal channels alone.

The estimates of the central bank of IT exports receipts are lower than the estimates of Pakistan Software Export Board (PSEB) and Pakistan Software Houses Association ([email protected]) which stand at nearly $3.3 billion per annum.

SBP reports stated that;

Estimates by industry experts place the total size of Pakistan’s ICT exports at around US$ 2.5 billion. Of these exports, the registered firms using formal banking channels to collect export receipts account for around $ 1 billion.

However, roughly US$ 1 billion is attributed to SME exports in the grey market, and the remaining US$ 0.5 billion is accounted for by freelancers in the IT and IT-enabled services (ITES) space that serve international clients.

While the major stakeholders provide different estimated figures pertaining to the undocumented exports, a common narrative prevails when it comes to reasons behind the under-representation of receipts in the official statistics.

The absence of PayPal – the most widely used payment method across the globe, used by both employers and freelancers because of its convenience, cost and safety – is a major concern.

A majority of foreign clients generally make their transactions through PayPal, rendering it undesirable for them to concurrently use alternative platforms. PayPal gives an additional payment reversal/dispute resolution facility to the freelancers, which helps in increasing the level of trust between the transacting parties but the domestic freelancers or the exporters of digital content have to pay extra to settle their transactions via alternative channels (e.g. Payoneer and Skrill), the report added.

Although exchange services of intermediaries such as Payoneer and Skrill are available for individuals and startups associated with the freelancing, little progress has been made in introducing the most widely used digital payment service of PayPal. As things stand, data privacy is one of the major hurdles in the way of PayPal to enter Pakistan. Furthermore, as PayPal’s funds transfer mechanisms work in a bidirectional fashion, there are concerns for countries with weak external buffers risking excessive outward remittances of foreign exchange.

In order to facilitate freelancers, SBP has recently allowed commercial payments – both B2C and C2B – through the bulk payment processing channel under the Pakistan Remittance Initiative (PRI), which may not perfectly substitute PayPal but can potentially provide some relief in the form of lower financial charges relative to other channels. Cumulatively, such efforts would help improve industry’s fundamentals going forward.