Pakistan’s technology and communication sector performed better than its rival countries in 2022, according to a new report from Topline Securities.
Pakistan’s IT sector was compared to MSCI AC Asia Pacific Information Technology Index since it is the most relevant comparable index. It is a free float-adjusted market capitalization index that captures large and mid-cap securities across 5 Developed Markets (DM) countries and 9 Emerging Markets (EM) countries in the Asia Pacific region.
MSCI AC Asia Pacific Information Technology Index also includes Pakistan in its Index. DM countries in the index include Australia, Hong Kong, Japan, New Zealand, and Singapore while the EM countries include China, India, Indonesia, Korea, Malaysia, Pakistan, the Philippines, Taiwan, and Thailand.
As per the report, Pakistan’s IT sector declined by 22 percent (in terms of USD), while the MSCI AC Asia Pacific Information Technology Index slumped by 33 percent in 2022. In terms of PKR, the sector’s performance remained unchanged throughout the year.
These numbers were primarily driven by Systems Limited (SYS), a Pakistani technology company that provides mortgage, apparel, retail, BPO, and other services. The company’s market cap increased by 4 percent in terms of USD and a remarkable 34 percent in terms of PKR in 2022.
The company’s earnings grew by 103 percent in PKR and 60 percent in USD terms in September 2022.
Other companies in the top 5 list behind SYS were TRG, PTC, AVN, and Airlink. The market cap for all these companies declined in 2022 by up to 60 percent.
Pakistan’s IT exports increased by 9 percent in the first eleven months of 2022 (11MCY22), while other countries in the global index mostly remained stagnated throughout the year, according to numbers sourced from Gartner IT.
Topline Securities predicts that Pakistan’s technology sector will continue to outperform its rivals due to its low base, availability of cheap labor, and expansion into the Middle East where the economies of scale of local companies allow them to garner projects of lower ticket size. These contracts are not feasible for bigger IT services companies in the region.
This allows local companies to hire cheaper resources to deliver their services. These resources cost about 35 to 40 percent less than other countries in the Asia Pacific region. Hence, Pakistan’s IT sector is expected to grow by 15 to 20 percent in the next 3 to 5 years.
